Currencies

Asia markets tentative ahead of Opec meeting

Wednesday 2.30am GMT Overview Markets across Asia were treading cautiously on Wednesday, following mild overnight gains for Wall Street, a weakening of the US dollar and as investors turned their attention to a meeting between Opec members later today. What to watch Oil prices are in focus ahead of Wednesday’s Opec meeting in Vienna. The […]

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Banks, Financial

RBS emerges as biggest failure in tough UK bank stress tests

Royal Bank of Scotland has emerged as the biggest failure in the UK’s annual stress tests, forcing the state-controlled lender to present regulators with a new plan to bolster its capital position by at least £2bn. Barclays and Standard Chartered also failed to meet some of their minimum hurdles in the toughest stress scenario ever […]

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Banks

Barclays: life in the old dog yet

Barclays, a former basket case of British banking, is beginning to look inspiringly mediocre. The bank has failed Bank of England stress tests less resoundingly than Royal Bank of Scotland. Investors believe its assets are worth only 10 per cent less than their book value, judging from the share price. Although Barclays’s legal team have […]

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Currencies, Equities

Scary movie sequel beckons for eurozone markets

Just as horror movies can spook fright nerds more than they expect, so political risk is sparking heightened levels of anxiety among seasoned investors. Investors caught out by Brexit and Donald Trump are making better preparations for political risk in Europe, plotting a route to the exit door if the unfolding story of French, German […]

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Currencies

Dollar rises as markets turn eyes to Opec

European bourses are mirroring a tentative Asia session as the dollar continues to be supported by better US economic data and investors turn their attention to a meeting between Opec members. Sentiment is underpinned by US index futures suggesting the S&P 500 will gain 3 points to 2,207.3 when trading gets under way later in […]

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Archive | Property

Five homes for basking in the winter sun

Posted on 25 November 2016 by

Villa Grafias, Marrakesh, Morocco, €4.3m

Where In the leafy Palmeraie district just north of central Marrakesh. It is about 10km to Menara international airport.

What A spacious, two-storey villa with 10 bedrooms and 10 bathrooms, plus staff quarters, a hammam, tennis court and gym.

Why The average high temperature between December and February hovers at about 20C. The heated outdoor pool is perfect for basking in the winter sun, or for those seeking a little shade, there are plenty of palm trees in the lush, seven-acre garden.

Who Christie’s International Real Estate, christiesrealestate.com, tel: +212 66155 0905

72-415 Ka’upulehu Drive, Hualalai, Hawaii, US, $14.95m

Where On the private Hualalai estate on Hawaii Island, the largest of the eight islands in the Hawaiian archipelago. It is a 10-minute drive to Kona international airport.

What A gated villa with 7,000 sq ft of living space and ocean views. The property has five bedrooms, a pool with an inbuilt Jacuzzi and a soundproofed cinema room.

Why From December to February, the average temperature reaches highs of 26C and there are up to nine hours of sunshine a day — great for sun worshippers and the solar panels that provide the property with hot water.

Who Hualalai Realty, hualalairealty.com, tel: +1 800 983 3880

Signature-style villa, Palm Jumeirah, Dubai, UAE, Dh65m ($17.7m)

Where On Palm Jumeirah — the distinctive, palm-shaped artificial island that juts into the Gulf from the Dubai coastline. It is 30 minutes’ drive from Dubai international airport.

What A seven-bedroom, contemporary villa with staff accommodation and 24-hour security. There is also a cinema room, games room, gym and parking for four cars.

Why Thanks to Dubai’s desert climate, winter temperatures range from an average low of 14C to an average high of 26C. Those who tire of catching rays by the pool can move to the beach at the end of the garden.

Who Knight Frank, knightfrank.com, tel: +971 4 4267 610

Villa Jasmine, Sunset Island, Miami, Florida, US, $21.5m

Where On Sunset Island in Biscayne Bay, about 12 miles from Miami international airport.

What A 6,700 sq ft, Moroccan-style mansion with five bedrooms and a separate guest house. There is also a pool and private dock. Previous owners include the singer Enrique Iglesias.

Why Not only is this home painted sunshine-yellow but the island lives up to its name as a plum spot to watch the sun set over Miami.

Who ONE Sotheby’s International Realty, onesothebysrealty.com, tel: +1 877 630 8155

Shogun, Mustique, St Vincent and the Grenadines, $18m

Where On the private Caribbean island of Mustique. Flights to St Lucia take 30 minutes and depart daily from a nearby airstrip.

What A Japanese-style house with five bedrooms and two separate cottages set around landscaped koi ponds. There are also two pools and a nine-tee golf course.

Why Average winter temperatures range from 21C to 28C. The villa can be rented out to sunseekers for up to $57,000 a week.

Who Knight Frank, knightfrank.com, tel: +44 20 7861 1553

This is why millennials hate letting agents

Posted on 25 November 2016 by

Young people renting flats in London are easy prey for letting agents. Many of us endure the annual trauma of searching for a new flat, displaced by rising rents to cheaper parts of the capital. But every time we move, the agents profit from our pain.

This summer, after a long search, a friend and I made an offer to rent a south London property. The letting agent emailed us to outline the costs involved. As well as paying one month’s rent deposit and one month’s rent in advance, they charged us a one-off “admin fee”.

This came to more than £700.

I was reminded of the sheer violence of this fee at the Autumn Statement this week. There were cheers when the chancellor announced plans to ban tenants from paying them in future. That an agent can charge this much for a credit check and bit of photocopying reflects the distortions and imbalances afflicting an entire generation of the capital’s renters.

If London’s middle-aged are culturally identified by sitting around the dinner table discussing house prices, young Londoners are identified by standing around (there probably won’t be enough space to sit), discussing their experiences of letting agent extortion.

As well as the straightforward conflict between young and old, renting a flat in the capital is also a gladitorial battle between the young — and the even younger. In all of the flat searches I have experienced, I doubt I have encountered anyone over the age of 30.

Letting agents rely on unjustifiably high fees to maximise profits; they also rely on young, cheap labour, which they can entice with the promise of a kind of watered-down 1980s-small-broker-outfit lifestyle, complete with bonuses and a company car.

Pressed to pay the £700 fee and secure the property, my flatmate and I seriously deliberated about whether we should. A supposedly rational assessment of pricing does not make sense without a consideration of the context, which, being the London property market, undermines any faith in rationality or fairness.

In our case, the specific context was a dozen property viewings in a week — a kind of exhausting, modern-day picaresque tale with letting agents cast as villainous young friars (and the effects of monetary policy replacing the distant abuses of papal authority). This catalogue of mishaps and organisational disasters had left us in an extremely weak negotiating position.

A typical visit would unravel as follows. We would arrive at a flat in Brixton, advertised as having two bedrooms. One of us would realise there was only one bedroom. We’d point out that the flat had been advertised as having two. The agent would apologise and gesture towards the living room, which could “easily become a bedroom”. But this flat was advertised as having a living room, we’d reply. The kitchen, he’d say, with a further limp gesture, is “arguably a living room”.

One day at roughly 1pm, I received an anonymous call. “Thomas, I have some very bad news”, the caller began. He paused. Our 2pm viewing had been cancelled because someone had already put down a deposit. For any given flat, it was clear that if we had an issue with the terms or the fees, there’d be someone else who wouldn’t.

The £700 admin fee was nowhere near the most absurd moment in our hunt. After deciding to walk away, we discovered exactly the same property was on the market with another agent, who charged an admin fee of only £120. When we made an offer through that agent, the earlier agents rang us to complain. If we had made another offer through a rival agent, they explained, they would take legal action against that agent to derail the offer.

This kind of behaviour can be very profitable. Given the high margins currently generated by admin fees, it is no wonder that the share prices of several property groups fell so sharply this week. For landlords, the outlook is more complicated. I think the argument that agents will “pass on these fees” to landlords is questionable; landlords, unlike tenants, can simply choose a different agent. More importantly, the entire regulatory landscape is not prejudiced against them.

Ballooning letting agent fees have had an impact on the millennial balance sheet. When abolition comes, it will be welcome, but these fees are just one small, particularly vicious consequence of a vastly greater problem with the London housing market — part of an imponderable tapestry of dysfunction that makes up the modern city.

The UK’s capital is known for many things; but is in danger of becoming known for one. Last week, on a reporting trip in the Netherlands, I asked someone what their thoughts were on the Dutch housing market. Amsterdam was crazy, he told me, searching for the right words: “Like some kind of London.”

Thomas Hale is a markets reporter for the FT; thomas.hale@ft.com; Twitter @TomHale_

Technology groups move into banks’ City turf

Posted on 25 November 2016 by

Twenty years ago, the City trading floor of the London International Financial Futures and Options Exchange was jammed with traders in bright jackets buying and selling millions of derivatives contracts.

Now, what was once a key institution in the Square Mile is run from a bank of servers in Basildon, and 50,000 square feet of the former trading floor is about to be taken over by the fast-growing digital food delivery start-up, Deliveroo.

The arrival of a three-year-old takeaway app in the home of high finance is one sign of a diversification strategy pursued by the City since the 2008 financial crisis. “The City is definitely going through a reinvention,” says Simon Prichard, partner at Gerald Eve, the property advisers.

Digitisation ended the life of the Liffe trading floor — which is now part of Intercontinental Exchange — and most other “open outcry” trading pits. Then, as banks retrenched after the 2008 financial crisis, the City intensified its attempts to attract a greater spread of businesses, in part by changing its image as an area that shut down in the evening when stockbrokers and traders went home. It encouraged retailers, restaurants and bar groups to set up, and developers to move beyond glass monoliths tailored to financial giants.

More recently, the City has been pushing to boost digital connectivity, working to improve broadband speeds and costs for small businesses and to launch a free WiFi service.

“If Deliveroo had existed five years ago, they wouldn’t have looked here,” says Nick Pearce, leasing manager at Blackstone Property Management, a division of the US private equity investors, which owns the Cannon Bridge building the tech group is moving into.

Changing times: space in the City

Before: Liffe trading floor in the 1990s, above
After: Transformed offices for Deliveroo, below


© Blackstone

While the Square Mile has not been the focus of large-scale tech groups — Google, Facebook and Apple have taken spaces elsewhere in London — it has experienced a steady inflow from sectors other than finance.

The hotel booking service, Booking.com, leased offices in the Monument Building this year, while International Gaming Technology, the telecoms group VimpelCom and the share registrar Equiniti took smaller City offices in 2016, according to Cushman & Wakefield. Amazon, which is developing a new headquarters just outside the City at Principal Place, temporarily leased almost 50,000 square feet in Beaufort House near Aldgate.

In a further sign of diversification, the financial news and data company Bloomberg and publishers Hachette are also moving further into the City.

“[Deliveroo] points to a constant level of activity from the tech sector, rather than a booming level of activity,” says Chris Lewis, real estate partner at Deloitte.

Diversification has enabled City jobs growth to continue. “Since 2007 we have actually seen a fall in the number of banking jobs in the City, yet a large increase in employment overall,” says Chris Hayward, chairman of planning at the City of London Corporation.

Much of that growth has been in financial and professional services, but technology accounted for 37,000 City jobs in 2015, up 55 per cent from five years earlier, official figures show. Tech companies’ share of new office take-up increased each year from 2012 to 2015, while co-working spaces such as WeWork, which cater in part to start-ups, have also increased, according to Cushman & Wakefield.

For the growing “fintech” industry, proximity to financial services groups has been one lure; Monitise, a mobile payments app, is based near Bank underground station, where it is surrounded by commercial lenders.

Another draw has been rents, which have not grown as fast in the City as around London’s “silicon roundabout” in Shoreditch and in other up-and-coming areas.

Rents in the centre of the City stood at an annual average cost of £70 per square foot in the second quarter of 2016; rents in Shoreditch had almost drawn level at £66.50, after more than doubling in five years, according to Knight Frank. In Euston and King’s Cross, rents overtook the City in 2012.

Mr Pearce says the Cannon Bridge office is “cost-competitive” for Deliveroo. Construction staff are now busy transforming the former deal pit to suit a tech company — removing suspended ceilings to expose shining ducts and brickwork. Deliveroo is considering installing a central conference area made to look like a football pitch.

Change is also afoot in other City offices, says Mr Prichard. “Banks are looking to attract the same kids that are working for Google, and those kids aren’t going to work in a big silver box,” he says. “They are looking for sexy space.”

Before Deliveroo came on board, Blackstone had already decided to redevelop the 19th-century building that housed the Liffe trading floor with exposed brick, breakout areas and high ceilings, anticipating that a more relaxed environment would appeal to the broader market.

Attracting tech start-ups has its hazards. The mobile ecommerce company Powa Technologies, which had offices in Heron Tower in the City, collapsed into bankruptcy this year. While young companies are often required to provide deposits or bank guarantees, they may not offer the same security of long-term income to a landlord as a big financial group.

But the UK’s vote to leave the EU means the City is expected to continue with its push to diversify. Vacancy rates for central London offices have risen since the vote, according to Gerald Eve.

Elaine Rossall, head of research for London markets at Cushman & Wakefield, says: “Banks were consolidating and rationalising, in terms of their property strategy even before the Brexit vote. Brexit has led to a consolidation of those trends, and so growth going forward may be from the tech sector.”

Countrywide shares fall after profit downgrade

Posted on 24 November 2016 by

Shares in Countrywide fell more than 13 per cent on Thursday morning after the UK estate agency group warned that its full-year profits would be at the lower end of expectations.

Countrywide, which runs Britain’s biggest chain of residential estate agents, said changes in stamp duty and uncertainty following the EU referendum in June meant that transaction levels are “currently running significantly below” last year.

The company said that it expected transaction volumes for the current financial year to be down 6 per cent compared to last year, adding that the level of market transactions was likely to be even lower next year.

Analysts were downbeat, with Michael Goltsman at Citi saying the trading update “highlighted continued challenging conditions within the UK residential property market”. Gavin Jago at Peel Hunt was even more pessimistic, saying: “There’s no light at the end of the tunnel here.”

Countrywide first warned in July that its full-year profits would be lower than last year after the UK vote to leave the EU hit the markets for homes and commercial property. The company reported a 25 per cent year-on-year drop in pre-tax profit in the first half.

Countrywide issued Thursday’s warning alongside its results for the third quarter, in which total group revenues slipped to £188.5m, compared to £197.1m in the same period last year. House exchanges fell 1 per cent across the company’s retail business, but plummeted 29 per cent in London.

Alison Platt, chief executive, looked to reassure investors, saying the company had made “good progress this year despite tough market conditions since the EU referendum”.

But shares in the FTSE 250 group plunged more than 13 per cent, to 167.30p, in the first hour of trading on Thursday.

The company’s shares have lost more than 55 per cent of their value since the start of the year, and hit a record low last month after Jefferies, its house broker, forecast earnings would slump to below pre-flotation levels.

Thursday’s disappointing results came just one day after UK chancellor Philip Hammond announced a ban on letting agents charging fees to tenants, sending Countrywide shares down more than 5 per cent on Wednesday.

Mr Hammond said the ban would be brought in “as soon as possible” following a consultation period, and Ms Platt said on Thursday that Countrywide “look[ed] forward to working with the government through this consultation process”.

The government believes that the ban will help millions of households in private rented housing save hundreds of pounds in fees. But some analysts have warned that landlords and estate agencies may pass the cost on to consumers by increasing rents instead.

Mr Jago said letting fees were a “high margin business for the estate agents” and the chancellor’s announcement was “another setback in a difficult year for Countrywide”.

Countrywide, whose businesses also include property auctions and mortgage lending, has also come under pressure in recent months amid increased competition from online focused rivals such as Purplebricks.

In September, the estate agency group said it would close 59 branches, or about 7 per cent of its high street network, after launching a fixed-fee, pared-back digital service similar to those offered by start-up online agencies earlier this year.

The company said on Thursday that it was “delighted” with the early results of its online offering, which showed the digital agency outperforming bricks-and-mortar across multiple measures, including the number of leads, instructions and registered buyers, since it was launched.

Countrywide shares at all-time low as transactions fall

Posted on 24 November 2016 by

Estate agents are not having a fun week.

Shares in Countrywide have sunk to a record low this morning after the company warned that transaction volumes are likely to fall this year and next.

Shares are down 14 per cent at publication time, to 167p, their lowest level since the company returned to the stock market in 2013.

The announcement, which said volumes had been hit particularly badly in London, has also dragged down shares at London-focused estate agent Foxtons.

Countrywide’s shares are off 4.5 per cent today, having already sunk 14 per cent after the chancellor promised to ban fees for tenants in the Autumn Statement yesterday.

Countrywide warns slowdown will last into 2017

Posted on 24 November 2016 by

UK estate agent Countrywide warned that its profits will be at the lower end of expectations this year, after changes to stamp duty and uncertainty following the EU referendum left transaction levels “significantly below” last year.

The company, which runs the UK’s largest chain of residential estate agents, predicted that transaction volumes for the full-year are likely to be 6 per cent lower than 2015, and added that it is “likely” that transaction levels will shrink again next year.

Revenue in the third quarter slipped to £189m, from £197m in the same period last year. House exchanges fell 1 per cent overall but the company suffered a big slowdown in London, with volumes 29 per cent lower on an annual basis.

Shares in Countrywide dropped as much as 5.5 per cent yesterday, after the chancellor announced a ban on letting agents charging fees to tenants.

Philip Hammond said he would introduce a ban “as soon as possible“, but Countrywide chief executive Alison Platt insisted “we look forward to working with the government through this consultation process”.

The company’s shares were already struggling before the Autumn Statement, hitting a record low last month after its house broker cut earnings forecasts.

In September, Countrywide said it would close around 7 per cent of its branches as online rivals build market share and low transaction volumes weigh on margins.

Alison Platt, Countrywide chief executive, said in its latest update on Thursday:

We have made good progress this year despite tough market conditions since the EU referendum, particularly pleasing is our growth in market share in both Sales and Lettings based on available market data up to July. In addition, these results in our Lettings, Mortgage and Professional Service businesses underline the importance of the breadth of the group and the focus we have placed on keeping the customers we win and continuing to serve them.

Mortgage approvals pick up in October

Posted on 24 November 2016 by

The number of residential mortgages approved by UK high street lenders recovered last month to 40,851, the highest level since May, but was still 10 per cent lower than in October 2015, according to the latest data from the British Bankers’ Association (BBA).

October’s figure compares to 38,690 approvals in September.

But mortgage approvals for the first ten months of this year are trailing 4 per cent behind the same period in 2015 and the BBA said there has been only a “relatively modest” increase in activity since the Bank of England cut interest rates in August as part of a stimulus package designed to protect the economy against any possible ill-effects of the Brexit vote.

While house prices have held up better than some might have been expecting since the referendum, estate agents have warned of a slowdown in transactions.

This morning, Countrywide, which runs the UK’s largest chain of residential estate agents, spooked the market when it wanted transaction levels were “significantly below” last year, also due to stamp duty changes introduced in April for buy-to-let investors and second home buyers.

It believes transactions this year will likely be 6 per cent lower than in 2015 and it also cautioned it is “likely” there could be a further decline in 2017.

However, existing homeowners are taking advantage of record low interest rates to remortgage. Remortgaging approvals for the first ten months of this year are 13 per cent higher year on year, according to the BBA’s data.

Consumers are also making the most of low rates to borrow for other purchases and BBA chief economist Rebecca Harding said consumer credit is now growing at its fastest rate since November 2006.

Lettings agents’ main incentive is well aligned

Posted on 24 November 2016 by

Lombard once rented a house in London to a nice chap from the Middle East. Subsequent checks of the kind nosy journalists specialise in revealed he belonged to the political wing of an organisation classed as terrorist by the UK and that one of his friends had been shot dead in Hackney the year before.

This called into question the value of vetting he had paid for on Lombard’s behalf via a lettings agent. The chancellor now plans to ban such transaction charges, to the dismay of investors in companies like Countrywide, whose shares have slumped 17 per cent in two days. However the business model of traditional lettings and estate agencies is more robust than bears imagine.

Jefferies estimates the ban would next year cut the profits of Countrywide and LSL by 9.2 per cent and those of Foxtons by 6.7 per cent.

Countrywide says in Scotland, where transaction fees for tenants were banned in 2012, most costs were eventually absorbed by landlords. However agents have little incentive to hold down transaction charges on tenants, whose fear of homelessness makes them less price sensitive than landlords. Any such premiums would come out of their bottom line, following a ban in England and Wales.

That would be a lesser impact on earnings. Moreover, falling share prices also reflect a weakening market for home sales and lettings, particularly in London and the South East. Countrywide focused on this problem in a trading update, warning that 2016 earnings before nasties will come in at the bottom end of City forecasts. That implies a number of £85m, compared with £113m last time.

Does the future belong to online rivals who lack the hefty overheads of Foxtons, LSL and Countrywide? Startups such as Purplebricks have tended to focus on home sales, but their fees to landlords could be substantially lower than those of high street rivals.

The difficulty is that a large upfront fee incentivises traditional agents to market vigorously properties they fear losing from their books. Landlords moan that lettings jockeys make a mint from a yearly transaction then do nothing. Long voids are costlier. As for Lombard’s tenant, he was very polite and paid his rent more punctually than successors who were not political refugees.

jonathan.guthrie@ft.com

Fintech start-ups look to build on US mortgage market share

Posted on 24 November 2016 by

Jason van den Brand can’t promise that your mortgage won’t end up with Wells Fargo. As chief executive of Lenda, a home-loan provider, he’s in the business of selling mortgages into a huge secondary market in which Wells is a significant player.

But he says that a wave of revulsion against the “too big to fail” bank, in the wake of the sham-account scandal, is prompting more people to look at alternatives. He says he’s had “multiple” people come to Lenda, a mostly digital service based a few hundred yards away from Wells’ HQ in San Francisco’s financial district, because they’re upset at the way the bank did business.

Younger people in particular, he says, are “tired of being nickel-and-dimed at every turn”.

Getting a toehold in the US mortgage market — easily the biggest in the world, with $8.4tn of loans pumped out by more than 7,000 originators — is not easy. Lenda is among a small group of fintech start-ups including Sindeo, Clara and Better Mortgage, which account for less than $1bn of total originations between them.

But market share is there to be taken, as the big brick-and-mortar banks such as Wells, JPMorgan Chase and Bank of America continue to be squeezed by tougher post-crisis regulation and higher capital and liquidity standards. The third quarter marked the first time that non-banks grabbed more than half of originations, according to Inside Mortgage Finance.

And fintech groups have made a big impression in other classes of assets. In the $80bn market for unsecured consumer loans, for example, the likes of Lending Club, Prosper and Avant have come to dominate, by coming up with user-friendly ways of crunching data to match borrowers and investors over the web.

There’s no reason why the upstarts cannot do the same in mortgages, says Jesse Beyroutey, a New York-based partner at IA Ventures, which joined Goldman Sachs, KCK Group and Pine Brook in a $30m funding round for Better over the summer. Better is now producing about $65m of loans a month through its online platform, flipping the loans on to about 20 investors including Fannie Mae, the government-backed mortgage company.

“The decisions banks tend to make about who to underwrite, and why, are actually rather simple but our regulatory system makes it overcomplicated,” says Mr Beyroutey.

“Giving a customer certainty that his or her loan will close at the best rate of ‘X’ per cent in ‘Y’ days, by abstracting away all the rules imposed by each bank — that’s exactly the sort of magic that’s been applied by tech start-ups in other areas.”

Things won’t always go smoothly. Eugene Berson, who works in business operations at Slack, the messaging software company, is hoping to close his Lenda loan soon; right now he is being held up by the discovery of an (old) piece of litigation against his homeowners’ association in the Potrero Hill district of San Francisco. If Lenda had “been a bit more high-touch” and called him to check if the case was still current, he says, the problem could have been averted.

Meanwhile, the banks won’t surrender more share to the upstarts without a fight. Two of the big five, for example, are now customers of Blend, a San Francisco-based company which supplies mortgage-origination software, according to Pranay Kapadia, vice-president of product management.

But whether banks go it alone or partner with a white-label provider like Blend, say analysts, they’ll need to improve their offerings. A JD Power survey this month found that 62 per cent of people under 35 who bought a home this year said they would use a mobile app for a mortgage application, if their lender provided it. More than one in five buyers of all ages regretted their choice of lender.

Getting a mortgage has “really been a very painful process” since the crisis, says Mike Fratantoni, chief economist at the Mortgage Bankers Association in Washington, DC, as litigation-wary lenders have agonised over “checking, double-checking and reverifying every aspect”.

According to the MBA, it costs independent mortgage banks over $7,000 to process a mortgage loan — up from about $4,500 in 2008. Servicing costs have more than tripled over that period.

If fintechs can find a way of making the process more pleasant for the borrower, says Mr Fratantoni, “that’d be a huge step forward”.

UK estate agents reel from letting fees shock

Posted on 24 November 2016 by

As this week’s Autumn Statement approached, UK estate agents were hoping for changes to a stamp duty regime they say has unnecessarily clogged up parts of their market.

Instead, they received a shock: chancellor Philip Hammond announced a ban on fees charged to tenants, which had been developing into a highly profitable business line. 

Tenant groups cheered the move. But investors in listed estate agencies fled, sending shares in Foxtons, the London group, down 13 per cent in an hour. 

The blow was especially hard because estate agency chains such as Foxtons, Countrywide and LSL had been relying on lettings as an expanding part of their businesses in an era of low sales transactions.

“Pretty much all of them have increased their exposure to lettings for that reason,” said Anthony Codling, an analyst at Jefferies. 

In the 10 years before the credit crunch in 2008, 1.65m homes changed hands each year in Britain, according to Savills. Since then the figure has peaked at 1.33m and is falling again. Meanwhile, the number of households renting privately has more than doubled since 2001 and is a growing market for estate agents.

Fees charged to landlords make up the majority of agents’ revenues from lettings, especially if they are hired to manage the properties as well as arrange new rentals. 

But fees to tenants, in theory charged for administrative services such as contracts and referencing, are a high-margin business. They have risen 60 per cent on average in five years, according to research by Citizens Advice.

Analysts at Peel Hunt said tenancy agreements, in particular, carry margins of about 80 per cent, with fees averaging £300 to £350. 

“Credit checks and inventory checks and references will remain an essential part of the lettings process,” they said. But tenancy agreements are “where the most pressure is likely to be applied by the government”. 

The Department for Communities and Local Government is set to consult on details of the ban, which Mr Hammond said would be brought in “as soon as possible”.

If it were introduced immediately and banned all fees to tenants, Peel Hunt said it would reduce Foxtons’ 2017 pre-tax profits by an estimated 11.4 per cent.

Foxtons said: “This was an unexpected announcement and the details and timing of the new policy are not yet known. As we get more clarity, we will review the impact to our customers and on our business.”

Countrywide and LSL, which have less specialised business models, face profit hits of an estimated 8.3 per cent and 9.1 per cent respectively, Peel Hunt said. The UK’s non-listed estate agencies face a similar problem, as does Aim-listed lettings agency Belvoir.

Savills, which has large commercial and overseas arms, is seen as less at risk, with its share price falling only 0.87 per cent on Wednesday.

11.4 per cent

Hit to Foxtons’ 2017 pre-tax profits if ban on letting fees immediately introduced, according to Peel Hunt

Potential winners from the ban are the digital-first estate agencies, which already compete on the basis of fees lower than their traditional competitors. Purplebricks, the largest of these, said it “does not expect the proposed abolition of tenant fees for letting … will have any meaningful impact on the business”.

Announcing the change on Wednesday, Mr Hammond said: “Landlords appoint letting agents and landlords should meet their fees.” Lobby groups have suggested that if the fees are passed to landlords, the burden would return to tenants in the form of higher rents.

Charging landlords the full sums previously levied on tenants may prove difficult, given the fees landlords already pay, their power to switch agents and a series of tax changes that have already reduced their returns.

“It’s going to be interesting to see how successful or not agents are at passing these costs on to landlords,” said Mr Codling. “In theory, you could ask landlords to pay everything — I don’t think that’s impossible, but I think it’s unlikely.”

Dominic Agace, chief executive of estate agency group Winkworth, said: “Where there’s plenty of supply of rental properties, as in London, I imagine agents will pass the charges on to landlords as and when they can.” 

Others are hoping that rather than a total ban, the consultation will result in certain fees being permitted, perhaps with a closer link to costs. The Fair Fees Forum — a group including government, campaigners and agencies that had been seeking a compromise on the issue — is continuing to examine the issue.

Scotland banned tenant fees in 2012, but evidence as to the effects is inconclusive; agents passed some costs on to landlords and rents did rise, but some analysts said that was down to other market factors.