©Bloomberg

One of the US’s richest property investors has stepped in to provide a loan to refinance the tallest skyscraper in the City of London in a £250m deal underlining the emerging role of non-bank finance in the UK corporate landscape.

Starwood Capital, the private equity fund of billionaire Barry Sternlicht, is understood to be in talks with Gerald Ronson and the Arab consortium that backed the development of the Heron Tower, the 46-storey office block built during the depths of the financial crisis.

The deal, if it goes ahead, would be one of the highest profile examples of a non-bank lender providing debt capital to a UK company.

A raft of European and US banks, including Citi – which was last week widely reported as having agreed the deal with Heron International – offered to provide the loan. Starwood, which had not previously provided senior lending in the UK, was already known to Mr Ronson, because both he and Mr Sternlicht addressed a conference organised by Michael Milken, the 1980s junk-bond king and long-term investor in Mr Ronson’s Heron group, at the Heron Tower in the autumn.

Starwood, which has lent more than $10bn to property companies in the US, launched its European debt fund at the end of 2012. At the time, Peter Denton, the head of European debt at the group, said: “a debt maturity bubble is looming, banks are severely constrained from lending and new property activities need funding”. The company has assets under management of $23bn and owns scores of hotels and casinos.

Mr Ronson, a veteran property entrepreneur, developed the skyscraper with a £370m loan, of which only £300m was used, from German banks Hypothekenbank and Landesbank Hessen-Thüringen. Under the terms of most construction loans a deadline is set by which the developer must secure tenants for an agreed proportion of the building.

The tower, completed in 2011 and boasting Europe’s largest private aquarium, has been slow to find tenants and is only 60 per cent leased. When completely let, the 230-metre-tall tower should generate annual rent of £30m.

The so-called shadow banking sector is a gathering force in the European property industry, coming amid a retrenchment by the continent’s largest banks. Insurance companies, pension funds and private equity firms have all provided a mixture of senior and mezzanine debt secured against both residential and commercial property.

However, the size of the market remains microscopic when compared with the value of outstanding loans held by banks. In the UK, for example, there was just £2.5bn of debt held by non-bank lenders compared with £214.5bn in the banks, according to research published on Friday by De Montfort University.

The government’s initiatives to boost the self-build property sector in the UK are not enough to make it a mainstream option, a report says.

Building your own home remains a niche pursuit, despite plans by the government two years ago to “revolutionise” the sector to help alleviate the shortage of new housing.

The Build-it-yourself report, published this week by the University of York and Lloyds Banking Group, said the market needs “significant further structural and cultural change” if it is to become a conventional option within the next decade.

Professor Janet Ford, co-author, said the market is at a “critical junction” and needs more government backing. She said more attention should be paid to multi-plot sites or group provision, to attract younger, less wealthy people.

The report comes two years after the government said self-build was part of its national housing strategy. In 2011, it announced plans to double the output of self-build homes from 100,000 to 200,000 units over the next 10 years.

It has also focused on boosting land supply and improving access to finance, two areas seen as holding back the market. Councils are now required to make more plots of land available for self-build projects. Last year the government launched a three-year £30m Revolving Loan Fund to provide short-term finance.

Around half of this fund has already been earmarked, according to the Homes and Communities Agency (HCA).

However, Mark Prisk, housing minister, said self-build was still a “nascent market”. He said the government was focusing on making more public land available, and that it had a pipeline of about 700 plots.

It is also consulting on making self-builders exempt from the Community Infrastructure Levy, a fixed-rate tariff on development that can add tens of thousands to the cost of a project.

“A lot has been done but there’s a lot more that needs to be achieved,” said Mr Prisk.

An all-party parliamentary group was set up this week to try to drive momentum.

Richard Bacon, a Conservative MP and founder of the group, said: “Self-build shouldn’t be the preserve of the most affluent. It needs to become a mainstream part of our housing supply.”

www.ft.com/money

Student pods – the latest buy-to-let vogue, where investors buy a single room in a development – have been attacked for failing to deliver promised double-digit returns.

Attracted by guaranteed returns of up to 10 per cent and prices as low as £30,000 – substantially less than an equivalent buy-to-let property – investors have snapped up pods across the UK.

But because the properties are small, typically 12-13 square metres, the bite-sized asking prices belie high underlying property values. A £59,995 pod investment on the market in Canterbury, for example, costs more than twice the average for the city on a per square foot basis, according to Hometrack, a housing analytics company.

Student-accommodation blocks have performed strongly,
with annual returns of 9 per cent last year, according to estate agent Knight Frank. Rents have been buoyed by the growth of students from Asia, who typically prefer purpose-built housing.

The strong market has attracted sophisticated investors, including private equity funds and overseas institutions. According to Jones Lang LaSalle, the property group, transaction in the UK student accommodation market was close to £1.9bn last year, more than double the value in 2011.

But there are fears that some developers are using the buoyant market to sell inappropriate products to private investors.

Kavita Bachada, an employment lawyer, bought a pod in Liverpool for £42,000 in 2011, tempted by a 10 per cent yield guaranteed for 12 months. “There was nothing out there . . . that offered anything like these returns,” she said.

While the income flowed as expected for 18 months, it has since dried up. Middle England Developments, the developer, has now asked pod investors for a three-month “payment holiday”. It blamed a surge in vacancies caused by tuition fees, a clampdown on foreign students and a wave of development in the city.

One problem is that the eye-catching guaranteed yields are typically subsidised by the developer, so income from rents, and property resale value, may fall when the guarantee runs out.

Another developer, FreshStart Living, last month agreed a settlement to hand over a total of £131,000 in unpaid rent to 70 investors. It has since stopped selling pods to individual investors.

“The guarantees are rarely sustainable,” said Charlie Cunningham, its chief executive. “Investors are often left with a useless property from which they will not only struggle to generate a reasonable income but they will also struggle to resell.”

Mr Cunningham called for tighter regulation of the market, noting “people investing in property are not that sophisticated”.

©Charlie Bibby

Self-build. The phrase conjures images of affluent older people with overambitious projects that drag on for months and go hopelessly over budget.

While this is a stereotype inspired by the popular Channel 4 programme Grand Designs, presented by Kevin McCloud, it isn’t so far from the truth.

The archetypal self-builder is able to draw on substantial equity and savings to fund the building of their dream home. The average project, including the purchase of land, costs £255,543 – a figure well out of reach for many first-time buyers.

“We always think of Grand Designs when we think of self-build and even the government website has a picture of Kevin McCloud on it,” says Yolande Barnes, director of residential research at Savills, the estate agent.

“I think you’ve got to get away from that very bespoke product which is actually incredibly expensive to build and requires that big capital and emotional investment and move towards a much more standard product.”

The government is keen for self-build – or what it now calls “custom build” – to become a mainstream housing option. In 2011, as part of its Housing Strategy for England, it announced plans to double the output of self-build housing from 100,000 units to 200,000 over the next decade.

The government last year launched a three-year £30m Revolving Loan Fund to provide short-term project finance for self-build group schemes. In April, it announced a consultation to look at exempting self-builders from paying the Community Infrastructure Levy, which can add between 10 to 15 per cent to build costs.

Research suggests there is big potential for the UK market. We build far fewer of our own homes than European countries. Around 12,000 self-build homes are completed in the UK each year – just 7.6 per cent of new housing supply. By comparison, more than half of Hungary’s housing supply is self-built. In France it is 38 per cent, in Sweden 30 per cent and in the Netherlands 10 per cent.

Group custom build schemes

Co-housing

Originating in Denmark, the co-housing model is a type of collaborative housing in which residents participate in the design and operation of their own communities, with residents committed to living as a community.

Eco-developments/villages

Eco-villages are communities set up with the aim of providing a socially, economically and ecologically sustainable way of living.

Self-build for rent

An established form of group scheme where members provide a set number of hours of their labour, usually in exchange for training opportunities in building and/or a reduced rent calculated on the free labour input which leads to a lower build cost. These schemes usually require a specialist housing agency to lead, fund and organise the development.

“Sweat equity” group model

Sweat equity group models typically involve group members providing a set number of hours of their labour (or labour on their behalf from family and friends) in exchange for a specified saving on the market value of the completed property.

Community Land Trusts:

A CLT is a non-profit community-based organisation that develops, and stewards, a range of assets to meet the needs of the local community, including affordable housing, workspaces, and community facilities, farming and gardens. CLTs are owned and controlled by the community. Affordability is measured in relation to the local market.

Source: Centre for Housing Policy, York University

However, a new report published this week by Lloyds Banking Group in partnership with the University of York’s Centre for Housing Policy warned that the self-build market requires “significant further structural and cultural change” – beyond the current initiatives – if it is to become a conventional housing option within the next decade.

“If the sector is to become a mainstream component of the housing market, attracting younger, less affluent households, its structures and processes – along with the support provided – will have to be smarter and more co-ordinated,” says Alison Wallace, one of the authors of the Build-it-Yourself report and a research fellow at the Centre for Housing Policy.

Experts agree that greater focus needs to be placed on multi-plot sites or group provision if volumes are to grow significantly.

“I think group schemes are the way forward,” says Ted Stevens, chair of the National Self Build Association. “The current market place consists of mainly individuals in their later years who are building their dream retirement homes. But the potential of the market is the 20- and 30-somethings who are looking for an affordable home for themselves.”

According to Stevens, two of the biggest obstacles remain securing a plot of land and the red tape of obtaining planning permissions. Financing the work is also tough.

But the situation is improving. Councils are now required to make more plots of land available for self-build projects. Stevens believes there are at least 2,000 self-build plots in the pipeline from local councils. “There is a lot more happening at local authority level than many people realise,” he says.

According to the Homes and Communities Agency (HCA), nearly half of its £30m fund has already been earmarked for group schemes – just a year after launching.

Group schemes can vary significantly, with options ranging from co-housing schemes, eco-homes and developer-led projects (see box).

Some local authorities are using custom-build to boost their supply of social housing. Last week, Lewisham Council announced plans to build up to 16 homes in a site in Ladywell, southeast London.

By autumn, it hopes to have selected a community group or individuals from its social housing waiting list that will work with the council and a housebuilder to develop the homes and develop their skills in housebuilding trades.

Councillor Susan Wise, cabinet member for customer services at Lewisham council, says the borough has a history of self-build, adding it wants to do everything it can to build new “affordable housing”.

According to the Build-it-Yourself report, the role of local authorities is crucial in delivering a change in volume. However, most continue to operate in isolation, do not always see self-build as a priority and there is little sharing of experience. None as yet rival the scale of schemes in the Netherlands or Germany.

Barnes of Savills suggests that one way to boost volumes would be for the government to introduce ‘build-to-own’ initiatives similar to those now being seen in the ‘build-to-let’ sector. This could involve the deferment of land payments as a way of making schemes more affordable.

On the individual self-build route, Wallace says there needs to be an easing of access to finance for it to become more of an option for first-time buyers.

Currently, most self-builders need substantial savings to purchase the land and build the property. Most mortgages require deposits of about 20 to 25 per cent of costs, which can prove difficult for those on lower incomes.

Stephen Noakes, mortgage director at Lloyds Banking Group, announced this week the bank will review its lending on self-build properties to help boost volumes. It will consider lending on “kit homes” – prefabricated properties – and lowering the amount of deposit needed.

However, access to land and finance will need to improve significantly before self-build can become commonplace in the UK.

“It’s very difficult to get a plot of land if you are an individual self-builder and until that becomes easier it won’t become mainstream housing option,” notes Stevens. He says that on average, it takes about three to five years to find a building plot, followed by a year to get planning permission and one year to build the house.

Stevens adds: “Our objective is for it to be as easy to go out and buy yourself a building plot as it is to buy a new home today.”

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Ten tips for self-builders

1. Do your homework thoroughly. It takes years to qualify as an architect or a lawyer, and you will need a fair bit of design, planning, construction and legal knowledge to tackle a self-build. It will take at least a couple of years to climb the learning curve. So read the magazines, visit the self build exhibitions, pore over the websites and talk to lots of other self builders who have done it. A little knowledge is a dangerous thing; real knowledge is priceless.

2. Work out where you may still need help and recruit really good advisers. So, for example, if you don’t know your way around the planning system, find someone who does. If you’re not a practical construction expert, sniff out someone who is. Don’t think you can do it all on your own.

3. Work out a realistic budget. Figure out what you can afford, and talk to mortgage providers to see what they might lend. Don’t overestimate or delude yourself. And always include a 10 per cent contingency.

4. Identify where you want to build. Use the Self Build Portal (www.selfbuildportal.org.uk) to assess the land and construction costs in different parts of the UK (it varies enormously). When you’ve decided where you want (and can afford) your new home then you can begin plot hunting.

5. Clever self-builders acquire their plots before they go on the open market. So pound the streets, look over walls, stuff cards through letterboxes, exploit Google Earth and the Land Registry, or examine large-scale OS maps. All of these can help you find a piece of land that others may not have spotted.

Could ‘build-to-own’ become Britain’s fifth tenure?

6. If your budget is tight, investigate teaming up with others to form a group. By working together you could save 40 per cent of the cost of doing it on your own. And group self-builds don’t just build homes; they create fantastically supportive communities too.

7. Plot first; then house design. Not the other way around! Don’t begin to design your home until you have acquired a site, as every house design should respond to the specific plot’s views and orientation. Similarly, don’t decide on the method of construction until you know you have the plot.

8. When you have settled on your design, find a large flat area and (using tape) draw it out full scale, so you can check the layout really works. It is also helpful to engage with your neighbours to explain your plans and seek their support. If the neighbours don’t object you will have a much easier route through the planning system.

9. Shop around to secure good deals and discounts from materials suppliers, builders’ merchants and tradesmen. Don’t accept the first quote for anything. Good negotiators can save tens of thousands of pounds on the final cost of their homes.

10. Invest in the fabric of your home. The basic envelope (walls/roof) is relatively cheap to build. So go for space that is really well insulated, rather than extras such as expensive taps and other high-tech gadgets.

Tips from Ted Stevens, chair of the National Self Build Association

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Case studies: Self-build options

Option one: First-time buyers Jeff Pike, 33, a structural engineer, and his girlfriend Emma Keenan, 28, took self-building to heart with their two-bedroom house in Cheltenham. Gloucestershire.

The couple did almost everything themselves, from the design to the building. While Pike admits the process was long and “hard, hard work”, he is proud of the result.

“It’s just as I planned it. We have something nobody else anywhere in the world has. Every last tiny detail is exactly as we chose it,” he says.

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The couple bought their L-shaped plot from a local estate agent for £93,000 in 2008 and found it easy to get a 95 per cent interest-only self-build mortgage for £133,000.

Apart from the electrics, the heating system and external rendering and plastering, Pike and his girlfriend did all of the work. They both had two full-time jobs, so spent evenings and weekends working on the house while living in a caravan on site for three years. The build took two and a half years.

Pike says he learnt many lessons during the build. He says budding self-builders should really consider temporary accommodation, since living in a caravan quickly grew tiresome. They also found out the hard way the importance of hiring good professionals; the firm that rendered their house did a bad job.

He says having a strong personal relationship helps, too. “We started the project five years ago when I was 28 and Emma was 23. You will fall out all the time and you’ve got to come through it,” says Pike.

——————————————-

Option two: Individuals who like the idea of self-build but do not want the hassle of building it themselves can opt for a custom-built house.

Derbyshire-based Fairgrove Homes offers housebuyers this route. The developer will buy the site, arrange planning consent and install the infrastructure, while buyers can choose their location, design and a specification to suit their budget.

“We are traditional new homes developer on a small scale, therefore we are treating this as a halfway house between self-build and buying an off-the-shelf new home,” says Steve Midgley, managing director of Fairgrove.

There are different packages buyers can choose from. The minimum build stage is called watertight, which has roof, windows and structural internal walls and allows the buyer to finish the property. There is also the option of basic, bronze, silver and gold specifications.

Costs for land plots – which are mostly located in Derbyshire and Nottinghamshire – start from £78,000 for a four-bedroom house of 1,272 sq ft. The building cost varies from £67,000 for the watertight option to up to £135,000 for the gold package.

Midgley says this option is “self-build without the risks and without the dirty hands”.

It currently has plots in Morton, Derbyshire, Hucknall in Nottingham and 25 plots in Doncaster, South Yorkshire. The process is much shorter than an individual self-build; it typically taking three months to install the infrastructure and then five to six months to build each house.

Qatar Holding and property group Hines have taken a stake in a high-end real estate development in Milan, underlining the Gulf state’s strategy of diversifying from hydrocarbons.

The Porta Nuova project, which has a value of €2bn, is part of a major development taking place in Italy’s fashion capital ahead of its hosting the World Expo in 2015.

The move comes as Qatari and Chinese investors are increasingly trying to buy up Italian luxury goods assets as they seek to tap into rising demand at home for Europe’s high-end brands.

In Italy, Qatar has bought couture house Valentino and the owner of a luxury resort business in Sardinia. In France, it has picked up a host of assets – including the Paris Saint-Germain football team. It is also in talks to buy Fairmont Raffles Hotels International.

Qatar Holding would acquire, through a subscription of new shares, an ownership interest of approximately 40 per cent while the remaining 60 per cent would continue to be owned by the current sponsors, it said in a statement.

The project is financed by Italian banks Intesa Sanpaolo, UniCredit, Banca Popolare di Milano and Monte dei Paschi di Siena, and Germany’s Hypothekenbank Frankfurt.

Porta Nuova is one of the largest mixed-use real estate developments in a European city centre. The 290,000 square metre site is in an abandoned industrial district about 1km from Milan Cathedral.

The development, which is anchored by a skyscraper that is the new headquarters of UniCredit bank includes a series of luxury residential properties and retail stores also includes a large 90,000 square metre park.

It sits adjacent to Milan’s 10 Corso Como, a shopping and dining complex. Only the Brave, Costume National, Eataly – the new restaurant of Michelin starred chef Andrea Berton – and LVMH’s Sephora are among those brands already signed up to move into the area.

In a statement, the company said the aim of the project was to create “a showcase of Made in Italy to export internationally”.

Manfredi Catella, chief executive of Hines in Italy, said the partnership confirmed Porta Nuova as one of the most attractive investments in Italian real estate.

“Italy’s territory is one of the most important natural resources of the country that can support economic growth in the future,” he added.

©Bloomberg

Farmland prices in the US corn belt have risen at double-digit clip this year despite weaker grain markets in a move that will intensify debate over whether loose monetary policy and congressional largesse are inflating a bubble.

Agricultural land values increased 15 per cent on last year during the first quarter in a district that includes Illinois, Indiana, Iowa, Michigan and Wisconsin, the Federal Reserve Bank of Chicago said on Thursday. The region’s farmland values have trebled in the past decade.

Whether the market is overheating has become a feverishly discussed question among land shoppers from farmers to pension funds. Past booms have ended in prolonged declines, with US prices plunging by 66 per cent from 1919-1940 and more than 40 per cent from 1981-1987, according to research published by the Kansas City Fed.

“We’re trying to decide is this a cyclical thing, or is it permanent?” Mike Maires, senior real estate portfolio manager at Utah Retirement Systems, said at the recent Global AgInvesting conference. “It’s important for us that we don’t enter at a peak.”

Signs are emerging that the torrid rate of farmland gains may be cooling – the rise in the Chicago Fed district was a tad less than last year’s increase. Prices fell in Wisconsin, while rising 20 per cent in Iowa, the biggest corn and soyabean grower.

Bulls argue that with the world population set to top 9bn by 2050 and people in emerging markets eating more grain-fed beef, chicken and pork, the land rush is just beginning. Investors own less than 1 per cent of US farmland, suggesting an absence of speculative froth.

Perry Vieth, president of US land fund manager Ceres Partners, said: “It is farmers who are buying. When Goldman Sachs shows up at the auction, I’ll know it’s time to flip over to the sell side.”

Farmers making the biggest real profit in 40 years have borrowed at ultra-low interest rates to accumulate acreage. Unlike the last boom of the 1970s, the ratio of farm debts to assets is at a historic low.

However, the US Department of Agriculture forecasts farmers will be paid 32 per cent less for corn this year if expectations of a record harvest hold true. “Lower crop prices could slow the upward trend in farmland values,” wrote David Oppedahl, Chicago Fed economist.

Also, not all farmers have strong balance sheets; nearly a third of bankers surveyed by the Kansas City Fed said a substantial share of their farm customers had debt-to-asset ratios of more than 40 per cent. A rise in interest rates would put pressure on land prices.

“Some bankers expressed concern that a downturn in farm income or land values could impact the ability of more leveraged operations to meet debt obligations, particularly for borrowers using land as collateral on other loans,” the Kansas City survey said. Land values in its district are up 20 per cent on year.

Farm income has remained high despite last year’s devastating drought with support from $17bn in indemnities from taxpayer-subsidised crop insurance. US farm legislation advanced by the Senate agriculture committee this week expands the insurance programme.

The bill also kills the “direct payments” that subsidise farmers whether they plant a crop or not. A study by the USDA economic research service found these payments had boosted cropland values more than 30 per cent in parts of plains states including Kansas and Nebraska, suggesting an end to the programme could be bearish for some land values.

©Pascal Perich

Michael Bloomberg

New York property developers and other business leaders say they are concerned about how the city’s business climate will change once Michael Bloomberg steps down as mayor early next year.

The next occupant of City Hall faces a growing budget deficit, labour negotiations and ageing infrastructure, among other issues. Many executives worry the candidates lack the corporate experience and business affinity that have defined Mr Bloomberg’s approach over the past decade, and may be less sympathetic on business costs and taxes.

“The business community is concerned, not because they don’t like any individual candidate, but it’s the sense that we’re returning to an era of conventional politics where people who are fundamentally politicians, rather than business leaders . . . are going to be back in charge,” said Janno Lieber of World Trade Center Properties, an affiliate of Silverstein Partners.

Real estate carries considerable clout: the sector was the second-largest contributor to the city’s economy in 2011 and developers are some of the most generous donors to this year’s mayoral campaigns.

Candidates count executives at Related Companies, which is building the $15bn Hudson Yards project on Manhattan’s far west side, and Silverstein Partners, developer of three towers at the World Trade Center, among their bundlers – donors who solicit contributions from other supporters.

But at the same time as business leaders are opening their wallets to candidates, many praise Mr Bloomberg for avoiding the minefield of donor influence by using his own fortune to bankroll his three runs for office.

“Of all the candidates running, it is hard to see who could be like him as no one has the luxury to say, ‘I don’t care, the right thing for the city is this,’” said one chief executive of a global real estate company.

The leading Democratic candidates – frontrunner and city council speaker Christine Quinn, former comptroller Bill Thompson, public advocate Bill de Blasio and comptroller John Liu – are all career politicians who have spent years in elected office.

On the Republican side, Joe Lhota, the former head of New York’s transportation agency, has tried to position himself as a pro-business, socially liberal candidate in Mr Bloomberg’s mould. He trails all of the top four Democrats in head-to-head matchups in recent polling, however.

Will the next mayor be grounded in local clubhouse politics, or will they recognise New York City’s position as the centre of global business?

– Kathy Wylde, Partnership for New York City

Developers say they are particularly concerned about New York’s competitiveness on business costs and tax rates on the wealthy, often foreign, individuals who have helped support the high-end property market in recent years.

“While higher taxes are inevitable, from a developer’s point of view, it is important that the city does not price itself out,” said Joseph Moinian of the Moinian Group, which is building a 72-story office tower near Hudson Yards.

Tax worries have been heightened by the city’s fiscal deficit, forecast in Mr Bloomberg’s budget to reach $2.2bn in 2015. State and federal aid are projected to decline, and the city’s spending growth is expected to outpace rising tax revenue over the next four years, according to the non-profit Citizens Budget Commission.

“The business community does not feel there’s much latitude in terms of raising taxes because our combined city, state and federal burden is already the highest in the country,” said Kathy Wylde, president of the Partnership for New York City, a business lobbying group.

Business leaders also say the candidates have not paid enough attention to the larger questions of growth facing the city.

“Will the next mayor be grounded in local clubhouse politics, or will they recognise New York City’s position as the centre of global business and all that entails . . . [to] keep the city at the front of the pack in terms of global competition from other cities that are looking to attract talent and take our jobs?” Ms Wylde said. “We need a mayor who is also chief marketing officer.”

Still, local issues, such as labour costs, loom large for Mr Bloomberg’s successor. Most of the unions representing the city’s 30,000 employees – including teachers, police and firefighters – are working without a contract, some since as far back as 2008.

The mayoral candidates, who are seeking union endorsement, have blasted the Bloomberg administration for failing to reach labour agreements.

Some have also acknowledged, however, that workers may need to make concessions on healthcare costs and pensions to deal with rising costs that risk further inflating the city’s budget shortfall.

“Businesses might decide to leave New York if they can see their workforce does not want to live here due to higher taxes or if they just decide they cannot afford to be based here any more and cannot pay for their workforce to be here,” said the global real estate executive.

Veteran political watchers say such warnings are part of the electoral cycle.

“There’s the dance where businesses threaten to move. To some degree everybody’s heard that before and I think politicians factor that in,” said Kenneth Sherrill, an emeritus professor of political science at Hunter College.

He said he was “hard pressed to think of any candidate who is hostile to the business community.”

But, he added: “There is a strong sense that inequality has gotten out of hand in the city. There may be a strong sense that real estate community is getting more deference than it ought to. Land use decisions are always contentious and there’s nothing more scarce in New York City than land.”

A top-10 shareholder in RSA has publicly rebuked directors of the FTSE 100 insurer, criticising allegedly close ties with the firms that scrutinise the company’s accounts as well as their decision to slash its dividend by a third.

Standard Life Investments was the highest-profile investor to speak out at RSA’s annual meeting on Wednesday, when a series of individual shareholders also attacked executives’ pay levels.

In spite of the fierce criticism from some investors, RSA avoided a full-scale revolt in the latest sign that last year’s so-called shareholder spring has failed to repeat itself.

Including shareholders who actively withheld their support, more than one in nine votes at the meeting declined to authorise RSA’s directors to determine fees for auditors and also failed to back directors’ pay.

Insiders at the insurer were relieved the protest had been contained, although it was larger than usual for a listed company.

Guy Jubb, head of governance at SLI, said the Edinburgh-based asset manager was “surprised and disappointed” by the scale of the dividend cut. He added that communication of the change in policy had been “poor”.

“Excessive prudence was brought to bear,” said Mr Jubb, who has also spoken out about SLI’s concerns at other companies including BP, WPP and Barclays.

Mr Jubb, whose institution owns 2.6 per cent of RSA’s equity, also voiced disapproval of RSA hiring Deloitte for “lucrative consultancy work” in addition to its audit job.

Shareholders on Wednesday granted RSA permission to replace Deloitte with KPMG after the insurer recognised the “perception” of the auditor’s independence could have been impaired.

However, SLI criticised the audit committee for allowing this perception to arise in the first place and said it was “unwise” to change auditors so soon after the arrival of a new chairman and finance director.

Mr Jubb added the appointment of KPMG also “gives rise to an unfortunate perception of conflict” given connections between RSA’s new auditor and Alastair Barbour, chairman of the audit committee. He retired from KPMG in March 2011 after a 36-year career with the firm.

Meanwhile, private shareholders were critical of RSA’s plans to pay two executives £1.5m in bonuses and share awards for 2012, when pre-tax profits fell by a fifth.

They also attacked a £100,000 termination payment to John Napier, who has stepped down as chairman.

His replacement, Martin Scicluna, on Wednesday issued a fresh defence of the “tough” decision to cut the dividend in the face of the criticism.

“You employ us to manage this company prudently,” he said. “We consider it important to do the right thing.”

The proportion of earnings being paid out as dividends would have become unsustainable, Mr Scicluna said, given falling returns from RSA’s fixed income-dominated investment portfolio.

He highlighted that directors’ overall remuneration fell from £6m in 2011 to £4.3m last year but pledged a comprehensive review of the pay arrangements.

Mr Scicluna said that the appointment of KPMG followed a formal tendering process. The board was satisfied Mr Barbour was fully independent of his former employer.

Shares in RSA rose 4p to 113.5p. They have fallen 20 per cent from their 2013 high in mid-February.

Increased activity from first-time buyers boosted the UK mortgage market in March, with the number of loans climbing by just over a fifth compared with the previous month.

More than 19,000 loans, worth £2.4bn, were advanced to first-time buyers in March, the Council of Mortgage Lenders, a trade body, said on Tuesday, up from 15,900 loans in February but down on the 24,400 figure for March last year – though March 2012 marked the end of the stamp duty holiday.

CML reported an easing in lending conditions for first-time buyers with relatively small deposits. Though the average deposit paid by them remained at 20 per cent of the purchase price, there had been a gradual rise in homeowners taking on mortgages with deposits of 10 per cent or less, the trade body said.

Paul Smee, CML’s director-general, said: “More borrowers are taking out higher loan-to-value mortgages than at any other time in the last four years – a sign lenders are open for business.”

First-time buyers continued to account for an increasing proportion of all house purchase loans – rising to 45 per cent in March from 43 per cent in February.

The number of loans granted to home movers also rose in March by just over 10 per cent to 22,900. The loans were worth £3.8bn.

©Bloomberg

Yields on high-quality buildings in London and other prime markets have held steady at 4-6%

In the last days of 2012, executives from Norway’s oil-rich government fund gathered in their Oslo headquarters to thrash out the details of a €2.4bn deal that would a year earlier have been an unlikely call for even the most sagacious property market observer.

The world’s largest sovereign wealth fund was about to sanction its most lavish spending spree on property – buying warehouses.

The joint venture with Prologis, the industrial property landlord, was for Norges Bank Investment Management the latest in a series of increasingly ambitious bets on the global real estate market. The investment helped ensure the $720bn fund increased by 10 times its annual spending on property.

Far from being an outlier, though, NBIM is part of a wide-reaching shift in property ownership. Sovereign wealth funds have joined a global hunt by long-term, cash-rich institutional investors, including most of the world’s largest pension and insurance funds, to secure exposure to the property market.

Hans Vrensen, global head of research at DTZ, a property consultancy, says investors with the ability to enter the real estate market are increasingly eager to do so.

“The yields in the bond market are just not there at the moment; stocks, meanwhile, are volatile. With real estate, you have the attraction of total return [rental income and capital appreciation] and the protection of owning hard assets, which you know are not just going to get wiped out over night.”

Since recovering from its nadir in 2009, yields on high-quality buildings in London, Paris, New York and Hong Kong – the so-called prime markets – have held steady at between 4 and 6 per cent. Yields on 10-year UK gilts, US Treasuries and German Bunds, meanwhile, are at below 2 per cent.

Peter Damesick, chairman of CBRE research in Europe, says this spread is “the single biggest pull for money coming into property at the moment”. The case is one increasingly made by fund managers for stepping up their allocation to real estate.

The solution to the debt crisis is to raise asset values, so it makes absolute sense to own something that stands to benefit from that and also produces income in its own right

– Trevor Greetham, Fidelity Worldwide

Trevor Greetham, an asset allocation director at Fidelity Worldwide, says his fund has, with the exception of a few months, been overweight on property investments since May 2009. The fund is among the largest shareholders in a cluster of real estate investment trusts, a tax-efficient model that requires property companies to return 90 per cent of income to investors.

He adds, though, that the better yields on offer are only one side of the equation. “The solution to the debt crisis is – explicitly in the case of quantitative easing in the US – to raise asset values, so it makes absolute sense to own something that stands to benefit from that and also produces income in its own right.”

Another draw for institutional investors is the recent return of liquidity in the world’s big office and retail property markets. The $160bn invested into property during the final three months of 2012 was, according to data from Real Capital Analytics, the highest quarterly spend for five years.

In spite of the bounce back, much of the investment is focused on a handful of perceived haven markets, the foremost of which is London.

The UK capital has taken an increasing share of global property investment, with a host of Southeast Asian governments lining up to compete with Canadian pension funds and European private equity investors to own London buildings. The extent of the city’s dominance is underlined by data from CBRE showing that the value of transactions in London account for more than the total for any other European country.

However, some property industry experts are warning that the demand could be reaching its climax.

The fear is that the appetite for high-quality property is underpinned by a surge of ultra-long-term capital that will, once invested, prove deleterious to trading volumes. “If there is a negative, it is that there is a shrinking pool of assets as many are being locked away. The upshot is that turnover of stock falls off and the market becomes opaque and setting realistic prices gets much harder,” says one estate agent.

The competition for the best assets is starting to compress yields and drive some investors to seek out esoteric property investments.

US student housing, Dutch police stations, speculative residential developments in Germany and Brazilian shopping malls have been included in the wide sweep of so-called alternative property assets to be traded heavily this year.

The charge into these investments has been led by private equity firms such as Blackstone, one of the most active real estate investors globally with a $13.3bn fund.

Ken Caplan, Blackstone’s head of real estate in Europe, says opportunistic investors are enjoying a purple patch created by an unusual confluence of market forces. Banks on both sides of the Atlantic, many of them under the auspices of the state, are eager to sell the often troubled property they amassed in the wake of the financial crisis. At the same time, demand for stable property is soaring.

“The core buyers are focused on low-risk, bond-like yielding property, meaning opportunistic investors like us are investing in situations where there are problems, such as the capital structure or the management of a building, fixing problems and ultimately selling [to those same investors].”

But while these alternative investments were once the preserve of only the most risk-tolerant buyers, the fight for established income-producing property is pushing more conservative investors – such as the Norwegian government – to look further afield.