For those of you out there who do not know me, an introduction: I am a solicitor at MKB Solicitors LLP in Barnsley, specialising in commercial and domestic property and have been operating in the Barnsley area for the last three and half years or so. Previous to that, I practised in the North East of England, dealing with many and varied property-related transactions from the Scottish Borders to Yorkshire and beyond. At MKB, I continue to handle property transactions on a national basis and very often find myself on familiar ground.
When asked to contribute to this edition of ‘The Legal’, in particular with reference to my view of the current state of play in the commercial and domestic property markets in the Barnsley area, I took the perhaps unusual decision to firstly ask around some of our clients and contacts as to their views.
As a firm, we regularly act for investors and developers who very often ask us our opinion as to how we regard the markets and whether the green shoots of recovery are visible. On this occasion, I decided to turn the question back to those who really are on the ‘coal face’ of the property market and then add my own personal assessment based upon what we have experienced in the last six months or so.
Having canvassed opinion, it is clear that several themes have become apparent during this period.
Firstly, the domestic conveyancing market would appear to have taken a significant step forward, in that seemingly many more sales and purchase transactions are being undertaken than has previously been the case during the last four or five years. This notwithstanding that, as we all know, mortgages have over the last few months arguably become more difficult to obtain, the application process having been significantly enhanced, resulting in many would-be purchasers (in particular, first time buyers) finding it increasingly harder to secure an offer of mortgage. However, the view generally would appear to be that the enhanced application process has not had a significantly negative effect upon the numbers of successful offers to lend being processed. Of course, only time will tell, but heading in to the notoriously busy pre-Christmas period, the numbers of new instructions to buy and sell residential property are not showing any signs of slowing down – in fact, quite the opposite. This is, indeed, encouraging, not only for the legal profession, but for the wider professional and financial services industry generally.
Secondly, in terms of residential buy-to-let opportunities, the consensus seems to be that most investors (be they owners of a smaller, self-managed portfolio, or the larger commercial investment companies or syndicates with multiple-property portfolios) are of the opinion that the best deals have been and gone and that the signs of an ‘upward curve’ in the market have been apparent now for some time. It would seem that most investors, although still alive to opportunities, consider capital values to be on the rise and are now consolidating what they have managed to take on during the difficult times of the last four or five years.
Thirdly, turning now to the commercial property market. Increasingly over the last few years there has been a distinct propensity for companies and businesses to take on shorter term commercial lettings within either established or brand new developments, often on the basis of exceptional deals offering incentives such as significant ‘rent free’ periods, or rolling tenant break options with relaxed conditionality attached to them. Although there have in the last year or so been some signs of recovery within the commercial property market, freehold or long leasehold sales and purchases have it would seem been few and far between, with the exception of those cases where cash investors have swooped in for the quick deal, or where, as has often sadly been the case in recent history, commercial premises have been sold by mortgagees in possession acting under power of sale.
However, I don’t think it is at all controversial or unexpected to comment that lender-funded purchases have been rare and that they continue to be so. Although many of our lender contacts are keen to stress that their doors are always open to new opportunities, many commercial investors or operating businesses looking to take on new commercial premises are still nervous about committing to commercial lending obligations in a market which continues to be unpredictable and where such requirements as personal or cross guarantees have often been the norm.
Notwithstanding, there have recently been some encouraging signs of resurgence in the commercial property market in the region, evident mostly in the commercial lettings arena but also more recently in the commercial sales markets, albeit that in our experience this is focussed primarily around commercial premises and development sites where owners are willing to sell for reduced capital yields on the basis of quick turnarounds. However, it is our experience that cash buyers, or in some cases cash-rich self-invested personal pension funds, are the main players in these scenarios and it is likely that they will continue to be so, unless and until consumer confidence returns to the commercial property investment market and buyers are willing to take on commercial funding, in the knowledge that this can be serviced in the long term.
In conclusion, the last few years have been a long and difficult road for many, not least home owners and businesses who own (or aspire to own) their commercial premises. However, it is hoped that the glimmers of daylight which have undoubtedly been witnessed over recent months continue to shine through and that the green shoots of recovery flourish and grow in to strong branches, supporting further growth for the future.