22 July 2015

The 'joke' of Greek home-ownership

With over a third of households unable to meet tax obligations, four out of 10 Greeks recently said they would "willingly hand over properties to the state to fulfill future payments". One in three Greek households are unable to keep up mortgage repayments, with the situation so dire that Greek home ownership is now jokingly regarded as punishment for your child, threaten to pass on property.
Given that the tax burden increased sevenfold in the past two years, The Hellenic Property Federation reckons more than 500,000 property owners want to sell. Across Greece, about 300,000 residences are believed to be empty.


Last year Canada's Fairfax Financial invested $244 million to become the largest shareholder of one of Greece’s top real estate companies.
Along with Fairfax, other 'contraian investment' players gambled heavily on Greece property including Colony Capital in the US; Invel Real Estate Partners from the UK and Jermyn Street, an Arab-Turkish property fund.  In 2014 investments totaling €1.2 billion entered the Greek commercial-property market via foreign investors. That compares to a total investment of €900 million between 2008 to 2012 according to data from the Wall Street Journal.

 Fairfax CEO Prem Watsa describes his Greece property exposure as "very manageable ... We don’t see this as being too much of a concern.”  Watsa is famous for his 2011 bet on a Bank of Ireland turnaround which paid off handsomely.
Watsa said he conveyed to Greek Prime Minister Alexis Tsipras the "message" about getting a deal done and removing uncertainty in a private meeting a few weeks ago. He claims Tsipras was "receptive" and encouraged Fairfax’s continued investments in Greece. Fairfax is exposed in several ways to Greek property, it owns: a 41% stake in Greek REIT Grivalia as well as a majority stake in construction company Mytilineos. They also own Greece’s Eurobank.
Two years ago, private equity firms like Blackstone and KKR were seduced, not just by the weather but because of a certain Central Bank's promise to do whatever necessary to shore up the euro zone. But now, investors say Greece's messy political outlook has sealed off a vital source of capital. Levels of foreign mergers and acquisitions activity into Greece have fallen to their lowest since 1997 according to Reuters:


KKR's first Greek deal since at least 2005 has collapsed and a company Blackstone invested in has lost more than 14 percent in value. And the longer bellwethers like these lick their wounds over bad Greek bets, the longer mainstream investors such as pension funds will keep the country on the blacklist. "The macro risks are too great and the likely timeframe for recovery is too long for most of the players in our space to view Greece as being worth the effort at this early stage," said Marc Mogull, managing partner of real estate private equity firm Benson Elliot Capital Management. Blackstone bought a 10 percent stake in property developer Lamda for 20 million euros in July 2014. Lamda had signed an agreement to develop the site of the former Hellenikon airport but Syriza halted the plan, branding the sale of prime coastal property to Lamda as "scandalous". Lamda's stock has fallen 14.3 percent since Blackstone invested in July 2014 but losses could mount when trading on the Athens bourse, shut since June 26, finally resumes. "The asset class that continues to attract interest, despite the confusion at the moment, is tourism-related property and hotels," 

Notwithstanding foreigners are said to be "keenly eyeing Greek property"; they just aren’t buying anything.  The debt crisis has created much too much uncertainty, even if a Greek exit from the eurozone is unlikely there’s still the risk of a Greek property investment becoming illiquid in badly suffering economy.
Also Greece doesn’t have a national land registry system so, property is often sold without clear boundaries in terms of precise lot size or zoning. Plus there is "sky-high taxation" unacceptably high level of property tax which is "unsustainable."
The market is not functioning because of "unbearable taxation" and if a property owner makes income from property, that is also taxed. If Tsipras' government falls, there may be "a boom in real estate” according to economist Theodore Pelagidis at the University of Piraeus.

22 million visitors came to Greece in 2014, a record number according to the Bank of Greece.
The average price of a five-room villa with a sea view in Rhodes is roughly €1.5 million, compared with a similar sized property in Ibiza which costs around €4 million or Miami for €10 million.  Mykonos attracts the same ilk of buyers as the French Riviera or the Swiss Alps. But when you see an attractive price in Greece, "be aware of how much you need to pay to the Greek state."
Bank of Greece Apartment Prices Index - http://www.bankofgreece.gr/Pages/en/Statistics/realestate/default.aspx

14 July 2015

40% of private tenants are unsure what they’re responsible for

New research from MakeItCheaper.com shows that 43% of tenants renting from private landlords are unsure with whom responsibility lies for a number of aspects of their tenancy – either with their landlord or  with themselves. The findings, also suggest that only 11% of tenants think they know more about division of responsibilities than their landlords, while 48% say landlords know better. This perhaps suggests that a number of the disputes that do arise between private landlords and tenants could be caused by a lack of knowledge on the tenant’s part.
The most common areas in which responsibility has been disputed within the past year were:
1.    Furniture and Appliances = 14%
2.    Fixtures and Fittings = 13%
3.    Mould = 12%
4.    Energy Efficiency = 6%
5.    Utility Bills = 2%
The distinction between ‘damage’ and ‘fair wear & tear’ was voted one of the most ambiguous issues, with 25% of renters saying they would welcome clarification on this topic. However, different age groups are concerned about different aspects of tenancy:
•    18-24 year olds are most unsure of the rules around internal d├ęcor
•    25-34 year olds are most confused about whether they should pay for insurance or not
•    Over 35s particularly want clarification around rights of access
Those seeking information around division of responsibilities can find it in this ‘Landlord vs Tenant’ tool.
When questioned about the most important qualities for a landlord to have, over 65% say they most value honest landlords who fix the issues they’re responsible for. It would seem that many landlords do in fact display these qualities, as over 85% of tenants rate their landlord’s management of their tenancy as ‘average’ or better – with 60% giving a ‘good’ or ‘very good’ rating.
This – combined with the fact that only 15% of respondents saying they have had an unresolved dispute in the past 12 months – indicates that tenants’ attitudes towards private landlords are largely positive – contrary to popular belief. This is further supported by the fact that less than 1:5 tenants asked admitted that they have been too afraid to bring up issues with their landlord in the past.
Based in Central London with 190 staff and 38,000 customers, Make It Cheaper has been the No.1 destination for businesses to get a better deal on their utilities since it launched in 2007. Following its acquisition of Ofgem Confidence Code-accredited www.UKPower.co.uk in 2012, Make It Cheaper also provides competitive energy prices and free expert advice for households – online and over the
Further information: Nick Heath 020 7654 0730 / 07720 297972 / nick.heath@makeitcheaper.com

9 July 2015

Budget implications for private landlords

Guest post: David Lawrenson, Director Lettingfocus.com

Of the budget changes impacting housing, the biggie for the private rented sector is, of course, the restriction of the tax break on deduction of interest on buy to let loans to the standard rate.
The big pension funds who want a piece of the private rented sector action will be unaffected by this. So there may be much clapping and cheering among the “kindly” pension funds, big overseas investors and the other big boys, as their small “pesky and nasty” landlord competitors just got clobbered whilst they are thrown the keys to the private rent hen house.
As the small private landlords have grown the sector, including buying lots of new build, (at least they did until around 2002 when mortgage lenders panicked about all the poor lending they had done on what was clearly oversupplied new builds flats), this does not seem fair.
The government ought to read the Rugg Review from 2008. This thorough review, now presumably collecting dust on the Housing Minister's shelf, looked at the past performance of the big players in private rent and found their product and service was no better than that of small scale private landlords.
It is possible that the budget changes will not have that much impact anyway.
Landlords on higher rate tax may scale back on new purchases a little and bring forward spending on maintenance of their properties to get to a lower rate of tax, if they can.
Plus, for some, a company limited structure will be worth considering (though many mortgage lenders still cannot seem to understand the demand for this and have no products in place).
And, also, if they can, landlords will surely look to shift the ownership over to a spouse who may enjoy a lower rate of tax.
Lots of new would-be landlords who were considering entering buy to let may now think again.
However, a line has been crossed here, and landlords are now easy targets for the government, even a Tory one, wanting to raise some cash. Expect more of this kind of thing going forward. (And I’m sure my pre-budget prediction of the elimination of the little understood Private Letting Relief will come to pass within a year or two!).

Footnote: The bringing back of the renewals allowance seems very odd. If there was anything that was a bit of an open target for those inclined to play fast and loose with their tax affairs, the renewals allowance was surely it. At least the wear and tear allowance as a straight 10% deduction from net rent could not be dodged – and seemed a fair rate to levy. Most odd! 

ABOUT LETTINGFOCUS:

We show landlords how to make money in the private rented sector (PRS) using ways that work, which are ethical, fair to tenants and which involve minimal risk.
We also advise organisations that sell to or wish to develop business relationships with landlords or private tenants.

CONTACT DAVID LAWRENSON:
07834 081 600
david@lettingfocus.com

7 July 2015

Crowdfunding startup focused on breaking 'oligopolistic' position of UK house builders

Real Funds is a UK-based fintech startup focused on breaking the oligopolistic position of a few house builders controlling the land supply and who are not focused in building human-size projects.
Founded by Arya Taware, a former UCL young entrepreneur, Real Funds’ vision is to provide small and medium-sized (SME) developers access to alternative capital through a crowdfunding platform (peer-to-peer lending) to build housing development projects of small and medium scale. Below Arya answers some questions on how Real Funds intends to operate:

Real Funds Founder Arya Taware
    • How does Real Funds differ from other crowd-funding platforms related to property? 
    Real Funds’ direct competitors are not solely specialised in property developments, they have buy to let, renewable or other business loans as well. Real Funds’ main expertise is in the development of small to medium scale housing loans . Moreover, Real Funds will monitor the development project for its successful delivery.  Every individual who invests in any project via Real Funds will have a first charge, making it an asset backed investment.


    • What is the inspiration behind the idea? 
    I previously worked for a small sized property developer who would struggle to find funding to develop housing projects and realized it was an issue faced by many SME house builders. The real estate market is currently trusted by 5 to 6 major property developers controlling the land supply. SME property developers lack access to development finance, especially after the 2008 banking crisis. I saw an opportunity as alternative finance was gaining momentum and decided to use the lethal combination of technology and crowdfinancing to solve the gap in the property development market.

    • What types of projects will Real Funds be looking to finance and will you be focused on any specific geographical area?  
     Real Funds’ platform will have small-to-medium sized housing projects within the United Kingdom starting with Greater London. Due to our strategic property partners having vast experience in London-based development finance, we will first build our foundation here and then expand.

    • What are the criteria for a SME builder to participate in Real Funds? 
    The criterion involves a number of factors such as the track record of a property developer, their team and the project itself. Our property team will go through the project proposal and undertake a thorough vetting process. We also work closely with independent quantity surveyors and architects for the due diligence process.

    • What is your investment synopsis or why should people invest with Real Funds?
    All our projects would be by small-to-medium sized house builders who are building houses or flats for domestic consumption.
    Moreover, all our projects will have first charge on the property making it asset- backed investments unlike any other industry. Thus, people not only get access to invest in local development projects and beyond with as little as £10 but also help solve the housing crisis at the same time and earn returns of 10-12% per annum.

    We truly aim to ‘democratize’ investing in property development projects, making it accessible to all, which will be the beginning of a new phase of this traditionally closed exclusive industry.

    • How long would a typical Real Funds investment last? And in terms of ownership how will the investment be structured?
    As Real Funds is focusing on property development projects the typical life of the project is 12- 24 months. In terms of ownership and security for investors, we will have first charge over the properties for all of our projects, as well as , floating charge and personal guarantee.

    • What has the reaction been so far from property professionals for your business?
    The reaction from property professionals has been overwhelming especially after being shortlisted as a top 10 semi-finalist for Richard Branson’s Pitch to Rich 2015 competition. Many people are enthusiastic, as they love the concept of being able to invest directly in SME housing developments and enjoy monetary returns and at the same time help to solve the housing crisis. The property professionals love the fact that Real Funds’ will be monitoring the successful delivery of the project and keep the investor up to date throughout the project. 
    Moreover property professionals are thrilled to have the additional option of diversification and secondary market features on the platform.

    • How is the general public able to participate in Real Funds?
    Anyone can simply go on the platform, browse through the range of projects in detail and have the choice to invest as little as £10 in their local development projects or beyond for returns of up to 10-12% per annum, while at the same time helping to solve the housing crisis. 

    Here is Arya's pitch to Richard Branson's Pitch to Rich 2015 competition, where she's been shortlisted for as one of the top 10 semi-finalist out of more than 1000 entries

    6 July 2015

    New platform caters to 'demand side' property markets

    Kitere is a newly launched platform attempting to service 'demand side'  markets in London and Singapore. The founders believe that demand side real estate markets are 'mute' and that there are currently no tools available to consumers that 'make the real estate market function the same way as the financial markets.'
    [U]ntil now all search engines and platforms in the real estate world have been based on the offer side (Zillow, realtor.com in the USA, Rightmove.co.uk in the UK). Customers would LOOK FOR properties on a website, in the window of a real estate agent office or in the newspapers. Since there are other markets (including the financial markets) where things work differently and are demand driven, we have tried to extend practices from other markets to the property market and tried to give the demand side a voice.
    Kitere works by letting customers send "property requests" and allows realtors to craft 'bespoke answers'. Obviously, the company is young and arguably we should not expect too much given they are only a few weeks old. But I sent a request for a property Cricklewood London, and got a response 8,000 miles a way from an agent marketing a property in Bangkok!

    So there certainly is a problem either with the way the business is structured or perhaps it is the platform's technology that needs to be tweaked correctly.
    Maybe there is an argument for a demand side service provider to the property market; but I think Kitere works if look to focusing on their home market (they are actually based in Thailand) instead of starting out in London and Singapore, which really defeats the purpose of claiming to be 'demand side' with no actual access to the supply!

    Update: Kitere co-founder Vsevolod Sourkov emailed in response to our post:
    Just wanted to mention that since we are in beta, users will not get the full extent of the experience yet. As for any platform it takes some time to bring together both sides and to create the required liquidity. I'm sure you appreciate that.
    For your reference the reply you have received is a dummy reply not meant to for your demand but to demonstrate how the platform works. Apologizes if I didn't make that quite clear on the website. 

    26 June 2015

    Mitula to IPO in less than 48 hours

    Mitula Group the company that bought property search engine Nestoria a few weeks ago is now set to launch their IPO this coming Tuesday in Australia, Renthusiast can exclusively reveal. The IPO was announced a few days ago on Property Portal Watch, a blog and information service run by Simon Baker, who is also chairman of Mitula.

     Group CEO Gonzalo del Pozo exclusively revealed to us that it had taken him and Baker just a few short months to get this IPO together, from idea, to launch. Gonzalo said that he and Simon locked themselves away for a few days after discussing the idea at a PPW sponsored convention held this past February in Bangkok. They then wrote the prospectus, which is over 150 pages and with the help of legal and accounting experts got it approved by the stock exchange authorities in just a few short weeks.
    Gonzalo revealed to us last night at a private event in London that the company operates at about 50% profit and that the Nestoria acquisition was part of his 'strategic plan' to increase company profitability and market share, especially in certain European markets such as Germany, the UK and Italy, where Nestoria was a very dominant player and market leader. Also the strategic acquisition meant that the group now has leverage in emerging markets such as Brazil and especially India, where Nestoria had relationships in the local portal and classified search industry that they had cultivated even before Mitula Group itself had existed. Gonzalo also said he felt at the time Mitula's technology was more advanced than Nestoria giving the example of Mitula being 'WhatsApp' and Nestoria being 'Skype'.
    The IPO for the Madrid based company is set to raise A$150M (£75M) and is over-subscribed, according to Gonzalo. He also said that they could have IPO'd in just about any market in the world but chose Australia because the corporate culture is very similar to his native Spain. The plan for the IPO includes an aggressive acquisition campaign in the highly profitable but increasingly competitive classified search market. The company currently operates in 39 markets worldwide.

    Both Nestoria co-founders Ed Frefogle and Javier Hernandez intend to stay on with Mitula 'for as long as possible' and to play a critical role in the direction of the new business. Gonzalo also mentioned that he himself is happy to stay on as CEO for as long as needed but would also consider stepping aside if the occasion warranted in the future, perhaps because of a strategic change of direction or culture.
    Finally, it must be noted that Renthusiast is one of the few blogs in London that paid any attention to prop-tech start-ups such as Nestoria dating as far back as 2006.
    Nestoria is one of the few companies that we covered back then that is still around today in some form. Most prop-tech companies withered away, especially after the credit crunch of 2008 and the deteriorating property market and economic conditions in the UK and Europe. Many were eaten up by the giant Zoopla, who had tons of money behind them plus the influence of their heavyweight CEO Alex Chesterman. Outside of Zoopla, Nestoria is the only company that made it to IPO, but it did take the Mitula acquisition in order to get them to that level.