Hello and welcome to Property Questions Time. I'm
Stephen Galpin and this is the show where you can
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have your property related questions answered by
a team of property experts. And joining me today
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is Lucy Waters, Managing Director
of Aria Finance. Welcome.
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And Glenn Jacobs, Director of Next Home London
Estate Agents. Welcome to you, Thank you.
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OK, let's get straight on with the
questioning. And Glenn, you're going first.
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What are the most common reasons
for a home sale falling through?
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Wow. I think right now I'm having a real problem
with AI generated discounts requested upon
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exchange, if I'm honest with you. Four last week
I've had what people are doing is getting reported
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to, getting searches, getting the mortgage off
of the survey, the level two slash level threes,
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drone footage, roof inspections, damp
inspections on PDF documents, putting it into AI.
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And generating discount
requests on the basis of that.
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And unfortunately AI tells you what you
want to hear. So it's all bias, isn't it?
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It's all fully biased. There's no caveats to it.
There's no well if you've got a standard Victorian
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house, standard Victorian house has nooks and
crannies all over the place. Basements always got
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condensation and damp in the basements. Always.
But you're buying someone on the premise of you
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know what you're buying. You're not buying a brand
new build. You're buying a Victorian house that
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sometimes has signs of movement. That doesn't mean
it's falling down. That means there's signs of
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movement. It's lived for a war. It's that sort of
thing that you try and explain to someone and then
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they realise and come back to you, well, you're
acting for the vendor. I'm paid by the vendor,
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I'm instructed by the vendor, but I do have
a duty of care to advise you correctly. But
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the problem is you've gone to the point of
exchange before presenting this information to me.
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Do you think the proposal to
effectively bring back the
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home buyers information
perhaps is going to help that?
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I think it could potentially help or maybe hinder
because you might end up with some sort of redress
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claims 'cause if certain things aren't documented
in that, depends how far you want to go with them.
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If you have a is it going to include a level
two slash level three server of on a property?
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Who knows?
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Precisely. And that's kind of the issue that
you've got. If there's any information omitted,
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it looks like you've been sneaky, I suppose,
at that stage. yeah, it's a real problem and
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it's taking a lot of my time. And it's what I'm
here to do. But if you've got not only that,
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I mean AI is also elongating scenarios at the
moment. It's a problem right at this moment, AI.
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But I don't suppose AI can really judge or put
into context the information that it's giving
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you. I mean, you might be buying that property at
a super low price that takes into account all the
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potential defects, complications or whatever
else and AI won't context that, will it?
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Also, you probably had the majority of that
information before making the offer. You know you
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mentioned some surveys and things that come back
afterwards. But actually where that conversation
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should happen is when striking the price because
ultimately that's where you need to start pulling
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all the market information and you've been to see
it. You should have done enough diligence to be
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able to offer the right money unless something
really horrible comes out that would work.
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My job is to overcome objections, long and short
of it. That's what I'm there to do. Objections in
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regards to price and objections in regards to why
they're not purchasing the property. But if you're
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purchasing a dilapidated property at a certain
level, if you're expecting a vendor slash landlord
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to then decrease by a further £40, £50,000,
£60,000, and then the property's going to be worth
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peak market level, why is the vendor gonna pay
that in effect for you to benefit. Why don't they
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do that and then benefit from the market level?
Yes, there's scenarios where vendors can't put the
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money in their out of their own pocket, but that's
the counter-argument to that is well, you're
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asking that amount of money, why don't the vendor
just put that into that property and then get that
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actual level? They they're giving it to you for
this amount for the convenience of not having
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to do it. That's basically what they're doing. But
if you want to, if you want to reduce any further,
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in answer to the question, another avenue that's
causing sales to fall for a lot at the moment is
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time. Conveyancing's taking so much longer. I
think it's an average of five, six months at
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the moment. What I'm finding, and one solicitor
that I'm dealing with, had a big conference with
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a few solicitors at the moment, because there's
solicitors that are generating a hundred plus
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inquiries at the point of receiving the contract
pack. All that's done is by putting the IR
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With the risk of upsetting Lucy, that the
lenders issue that they're asking solicitors
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so many questions these days? Because
that's what the solicitors are saying.
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I mean, if yet they're not templated to
that particular property, they're generic.
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And I'm sure a lender doesn't care about generic
inquiries, it's specific to that property. So
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what they're finding, up to a hundred inquiries,
I've heard, just after receiving the LPE one, the
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fiction and fitness protocol forms and
the contract. Up to a hundred inquiries.
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It's ridiculous, but that's all generated again
by AI. And I think at the moment we're at a
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stage where it's not really benefiting the
transaction times or sales, it's actually
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finding its way of being
a hindrance at the moment.
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Anything to say to that Lucy?
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I think on the solicitor's side, what I
would say is my experience of the process is
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the buyer should instruct their solicitor that
should make inquiries on their behalf initially.
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So if those inquiries are coming out pretty much
day one, that won't be lender driven. The lender
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will then come in and potentially add another
hundred inquiries after that. But usually how it
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works is your solicitor is there to protect you,
raise the inquiries that they think necessary.
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Those inquiries get answered. And then when
the mortgage offer comes out and the lenders'
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lawyers are instructed, they then raise the
title inquiries that they think are relevant,
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which in effect should marry to a certain degree
with what the other solicitors raise, because
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to protect the lender is to protect the buyer,
they're very unified in terms of the queries. So
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we get problems with solicitors as well. And not
all solicitors are created equal. And I think
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it's really important when people are choosing
solicitors to make sure they choose one
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who is sensible and experienced. And
yes, you can look at a quote and say,
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this is a really low cost solicitor's fee,
but it's probably a conveyancer who doesn't
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necessarily have the same miles on the clock that
an experienced property conveyancer would have.
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And therefore, you're going to get more
of that, think. But customers often think,
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well, why would I pay that when I can pay that?
And it's just trying to educate people as to.
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And again, in London in particular,
you can always see the red flags when
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somebody out of London wants to appoint their
local family solicitor to perhaps down the south
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of England or in the north of England. Not
used to leasehold properties, for instance.
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No.
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Trying to come to terms with
the leasehold sort of ethos and
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just causes a mess, doesn't it? Yeah. Adds weeks,
if not months to the Absolutely. Absolutely. Okay.
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All right. Good one. Okay.
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Lucy, is there a particular financial
reform that would have a positive
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impact on the UK residential
property market at the moment?
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Financial reform. I think that, I think if we were
to look specifically at development finance and
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say, it's not necessarily a financial reform,
but a planning reform to enable developers to
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build more houses, I think that would have a huge
impact because at the moment we are constrained by
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supply. And when it comes to even rent, and you'll
obviously be seeing this in what you do, but rent,
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where they've tried to actually make renting
more affordable, it's gone completely the other
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way because there's such a lack of supply and
landlords exiting the market and things like that.
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We actually just have to build more homes. And I
think one of the first places that that is getting
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stuck is on the planning side of things. A
lot of developers feel really disheartened
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by the planning process, which is just getting
harder and harder all the time. So I think, OK,
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it's not financial reform, but a planning reform
would be a good step in the right direction. And
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dare I say, I think a change to stamp duty would
be a really big thing now. I don't know what that
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looks like and I'm not even gonna try and guess
at what that looks like. Obviously, it's a topical
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point of conversation at the moment because of
Andy Burnham's views on scrapping stamp duty.
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I think the challenge with how that might
end up channelling through is that the
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higher value end of the market pays for the
lower end of the market which is another....
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What about simply just switching stamp duty as
a liability to the seller rather than the buyer?
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I don't dislike that. I think that
would be a good way because then
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you don't have to come up with it as a
physical layout on purchase, which is
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a massive challenge. The annual property
taxes, I really dislike that because I think
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it forces people out of homes. And even
though it might not affect the masses,
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it will... the impact that it will have on a lot
of homeowners is massive. And buy to let, if they
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do it on buy to let, what's left in the margins
in buy to let? There's nothing, is there? I mean,
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buy to let landlords have, despite the press
that they get, have suffered some huge financial
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penalties over the years. And if they had to
pay an annual tax, I just don't think that...
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The margins are They're not there.
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I just feel the idea of switching it to the
vendor rather than the buyer would work well.
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And also, you've got to balance that against
don't forget if you if you sell your own home
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and it is your own home, whatever profit you
make, and there've been some huge profits on
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that the people have made and enjoyed is tax
free. So I don't think the imposition of the
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stamp duty liability change would
be that great or that unreasonable.
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I agree.
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And there's always the bit, there's always the,
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as you go through the transformation where
you have to work out whether it's just tough
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luck if you paid it on the way in and you're
paying it on the way out or whether they...
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Lucy, it would be very easy because when you pay
it, if you're one of the people that paid it under
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the old regime of going in, then you deduct that
from the payment you're going to make going out.
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Yeah, there's a way to balance the
books for sure. I think that the
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theory of it would work well. I mean, there's
also an argument, what about if you just scrap
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stamp duty altogether? I know that's a big
statement, but the market would move, wouldn't it?
0:11:41.960,0:11:47.120
It sure would. Okay, well, on that note, we'll
go to the break. So thank you both very much.
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Join me after the break when we'll be asking
Lucy and Glenn more of your questions.
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Hello and welcome back to part two of Property
Question Time with Lucy Waters and Glenn Jacobs.
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I've had my house on the market now for
some time with little interest being shown.
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My agent is suggesting that we have an
open house event to stimulate interest.
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What does the panel think of this idea? Well
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perhaps first of all you could explain to
us the principle of an open house showing.
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One of my favourite things in estate agency,
I must admit, when you when you have a good
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open house, there's not a lot better.
It has to be on a Saturday in my eyes,
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because most people are out viewing on a Saturday.
Has to be for a good 45 minutes to an hour.
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You have the house to yourself, so the awkwardness
of having the vendor ideally not being there,
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bogging at everybody walking around their
house, and maybe pointing out things that
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purchasers don't really care about, if I'm
honest with you. But the idea is to get
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a lot of purchases or potential purchasers
to come and view at the same time. I do it
0:12:51.960,0:12:55.120
tactfully. I've been moaned at before
because it feels like you're at cattle,
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a cattle show and all that sort of stuff. But
the idea is to have a purchaser-C competition
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and create that competition and create a buzz
about the property. And then when people come
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away from that after they've viewed the property,
they know they can't take the mick with offers.
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And waste people's time with offers. They
know that there's other interested parties,
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even if the other parties aren't interested.
They know that those other people, because
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you would upsell the interest, if I'm honest.
You would say you would you'd sort of project
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that there's so much interest in the property.
You see the amount of people that see it. Yeah
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you're gonna have to come in with a solid offer.
You need a confident estate agent to conduct that
0:13:34.000,0:13:38.640
as well. There's no point having a quiet estate
agent standing in the corner letting all these
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people it has to be someone that's there that's
going to engage with, exactly engage with it.
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The problem with the listener and viewer with the
question is there's no you can't just launch one.
0:13:52.080,0:13:54.920
It's not you're not gonna have a stagnant
property there and then go, all right, we'll
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have an open house on a Saturday. You're gonna
have to have a pricing strategy and a marketing
0:13:59.240,0:14:05.560
strategy that leads to that. So if you're gonna
adjust your price to a carrot dangling level,
0:14:05.560,0:14:10.800
that's what's gonna make an impact in the
market. You're gonna have to adjust your price to
0:14:10.800,0:14:13.440
something that's gonna entice people
to come and view the property because
0:14:13.440,0:14:15.960
nobody's gonna purchase it unless
they come and view the property.
0:14:15.960,0:14:22.800
I just wonder in some ways whether part of good
practice, shall we say, for estate agents would
0:14:22.800,0:14:28.800
be to have an obligatory sort of program.
You know, I'm taking this property on,
0:14:29.560,0:14:33.920
I'll take it first of all for three weeks, at
the end of three weeks, if we've not achieved any
0:14:33.920,0:14:41.360
interest, this is going to be my suggestion. We're
going to reduce the price by 5%, 6%, whatever,
0:14:42.400,0:14:48.040
and make that an obligatory part of the
of the agency contract. I think that would
0:14:48.040,0:14:52.000
be really helpful. People then wouldn't
feel as though they're being cheated
0:14:52.000,0:14:55.600
or they're being conned or they're
being pushed down a particular path.
0:14:55.600,0:14:59.880
I'do a two-week period personally. Yeah. I
will always go, look, someone if someone's
0:14:59.880,0:15:04.600
sort of disagreeing with the pricing, I'll go,
look, I'm here to be instructed by you. However,
0:15:04.600,0:15:07.680
this is my evidence, this is what I think,
and this is why I think we're going to get
0:15:07.680,0:15:11.920
the best price by doing it this way.
If you want me to try your pricing,
0:15:11.920,0:15:15.600
we'll have a two week period because the
first two weeks are super important to me.
0:15:16.320,0:15:19.960
You're going to get the property launched. The
first Saturday is going to be that open house.
0:15:20.480,0:15:24.480
So let's launch it full of photos, full of
videography, and have a full week. Let's not
0:15:24.480,0:15:27.600
have stragglers in the middle of the week at
seven o'clock at night thinking they can make
0:15:27.600,0:15:32.080
silly offers. Let's have everybody into your
property. If you're keen to sell the property,
0:15:32.080,0:15:36.240
everybody into the property at one o'clock on
Saturday for argument's sake. Then after that
0:15:36.240,0:15:40.000
first week, that's the second week where you're
gonna have your second viewings. People might
0:15:40.000,0:15:43.400
take a little bit more time in the property,
see something that they haven't noticed,
0:15:43.400,0:15:49.160
and then have a have a like a best and final
offer scenario at that stage. But those two weeks
0:15:49.160,0:15:54.040
are key. And if you've overpriced it and not
getting the attention after those two weeks,
0:15:54.040,0:15:57.440
that's on your idea in terms of
pricing. I've been honest with
0:15:57.440,0:16:02.880
you from day one and let's try and go down
your route, but that's how I represent it.
0:16:02.880,0:16:06.240
If a property hasn't sold or created any interest,
0:16:06.240,0:16:10.320
just by having an open house isn't necessarily
going to stimulate anything, is it?
0:16:10.320,0:16:13.400
Two reasons why property doesn't sell
generally it's the price or the condition.
0:16:13.400,0:16:18.040
Depending on condition, there's always a price
for it. So it's generally down to the pricing.
0:16:18.040,0:16:22.120
In that word condition, would you put
presentation into that? Absolutely.
0:16:22.120,0:16:27.440
Absolutely, yeah. Yeah. There's a lot more
staged photos now than I've ever seen before.
0:16:27.440,0:16:32.200
There's a lot more staging that goes into
photography. I know I have a couple of firms
0:16:32.200,0:16:36.040
that do AI and whatnot, which is illegal
under Property Miss Descriptions Act, but
0:16:37.360,0:16:43.200
there's companies that come in there and stage the
property for the photos. So yeah, presentation,
0:16:43.200,0:16:48.560
it's just like a recruitment job board as well.
I mean, if the job doesn't sound good, you're not
0:16:48.560,0:16:52.040
gonna click it exactly the same as a property.
If it doesn't look good and catch your eye.
0:16:52.040,0:16:56.000
So are you suggesting there's AI programs
that make your photos look a lot better?
0:16:57.720,0:17:00.760
Yeah. Unfortunately, but yes.
0:17:00.760,0:17:02.080
There we go. Anything to add to that?
0:17:03.600,0:17:08.960
Probably the only angle that I've got is what we
see. We do quite a lot of bridging finance in the
0:17:08.960,0:17:18.120
market and often the exit for bridging finance is
sale of property and we often have scenarios where
0:17:18.880,0:17:25.960
the valuation comes back lower than the intended
marketing price or the actual marketing price. Now
0:17:25.960,0:17:32.120
that can be viewed that the marketing price
has inflated or on the other side of the coin,
0:17:32.120,0:17:38.360
the value is being conservative because ultimately
the PI is on the line for mortgage valuation.
0:17:38.360,0:17:43.760
So perhaps there's somewhere in the middle
where that meets and is the right number. But we
0:17:43.760,0:17:50.440
actually do see it where people have stipulations
or put on them in their bridging loan conditions
0:17:50.440,0:17:58.120
that they have to reduce the price after a certain
period of time to get the interest going in line
0:17:58.120,0:18:03.200
with the valuation. So it's quite interesting
just seeing it from a different angle of where
0:18:03.200,0:18:08.960
people are trying to generate that interest.
Obviously that stagnation point is big because
0:18:08.960,0:18:15.040
if it does stagnate, then sometimes we just see
these properties sitting on the market forever.
0:18:15.040,0:18:17.920
And it does nobody any favours.
It don't it doesn't do the seller
0:18:17.920,0:18:21.160
any favours in regards to you've got
your property sitting there and it's
0:18:21.160,0:18:25.840
actually devaluing but by if it's been
on for a year, yeah. It's devaluing.
0:18:25.840,0:18:31.400
There's a level of your security going down, it?
Yeah. Week by week, mean. Lucy, your question.
0:18:31.960,0:18:37.520
In the past, property inflation has helped
create financial security for many homeowners.
0:18:38.200,0:18:43.440
Do the panel think that those days are now over
and that we should really look at homeownership
0:18:43.440,0:18:50.680
as being just that rather than a profitable
investment too? In other words, conflating those
0:18:52.200,0:18:54.720
two factors in terms of the value.
0:18:54.720,0:18:59.920
There was a period of time where everybody
thought about what their property would be
0:18:59.920,0:19:05.920
worth after X number of years of ownership, or
if they did set an alteration to the property,
0:19:05.920,0:19:10.360
know, can they add an extension? Can they
do a loft conversion and things like that?
0:19:10.360,0:19:15.480
And I think it's one thing where there's a
value add opportunity and someone's looking
0:19:15.480,0:19:21.240
to enhance the value through works
versus people buying to ride the wave
0:19:21.240,0:19:26.240
of property increases and make money and
like you say, create financial security.
0:19:26.240,0:19:32.120
I think when you're buying a home, you should
be buying a home and that should be the main
0:19:32.120,0:19:40.240
factor. But there is a small subset of people who
take advantage of the tax benefits of not having
0:19:40.240,0:19:46.160
to pay capital gains on their primary residence.
And they will live in a house for a couple of
0:19:46.160,0:19:52.520
years or whatever the statutory limitation is that
you don't have to pay capital gains and just roll
0:19:52.520,0:19:57.520
on and on and on and on and they move and they're
not wedded to any property and they have limited
0:19:57.520,0:20:02.160
resource so they want to own their own home
but they also want to do property development.
0:20:02.160,0:20:07.000
So there is a community of people that do that and
I think there's nothing wrong with that at all.
0:20:07.520,0:20:11.360
If we're talking about the masses, people
that have day jobs, they're not in property
0:20:11.360,0:20:19.080
development, they are buying somewhere to
live, then nobody wants to buy badly. You know,
0:20:20.240,0:20:26.280
when you're talking to people, it's really
important that they can see that they're not
0:20:26.280,0:20:31.440
on the wrong side of the purchase because then
ultimately when they go to sell it, it's going
0:20:31.440,0:20:37.480
to be the reverse. But I think as long as you're
buying at the right level, it should just be
0:20:38.000,0:20:42.600
a case of you're buying it as a home and
you're not looking at what the equity value is.
0:20:42.600,0:20:47.800
I suppose the question is, well, fact, mainly
people in my generation who were always taught
0:20:47.800,0:20:51.480
that if you buy property, you're going to make
money because it's just automatically going to go
0:20:51.480,0:20:58.600
up. those days in these difficult times are over.
You can't guarantee that the value is going to
0:20:58.600,0:21:04.840
go up just because you bought it. And then on top
of that, you've got this, as you mentioned, Lucy,
0:21:05.640,0:21:10.480
that's free from any kind of capital gains tax
or any tax if you make a profit on your home.
0:21:10.480,0:21:14.480
And a lot of people have relied on
that for funding their credit cards,
0:21:14.480,0:21:21.840
for funding their lifestyle.
And sometimes that perception of
0:21:21.840,0:21:28.240
theoretical profit that you've got tax free
has caused people to get into debt problems.
0:21:28.240,0:21:34.720
And that's certainly if people then look
to mortgage to pay off what, you know,
0:21:34.720,0:21:39.480
they're basically borrowing against the equity
that they've created. That can definitely be a
0:21:39.480,0:21:44.520
challenge. And we see that in there's a subset of
the market where people take a second mortgage,
0:21:44.520,0:21:49.840
which is a perfectly legitimate product. And it's
a great product for people that are looking to
0:21:49.840,0:21:56.000
consolidate debts or do home improvements, things
like that. But it has to be used responsibly.
0:21:56.000,0:22:02.200
We do come across customers who are in a debt
cycle and they borrow more money and then they
0:22:02.200,0:22:07.720
come back and all of a sudden they've got that
secured loan sitting behind their first mortgage.
0:22:07.720,0:22:12.160
And then they've suddenly got another
£30,000 worth of unsecured debt and
0:22:12.160,0:22:17.800
they want to consolidate it again. And I think
that's dangerous and that's where people get
0:22:17.800,0:22:24.040
themselves into trouble because the music
will stop eventually. But when it comes to
0:22:24.040,0:22:31.080
creating equity in your home and seeing that,
okay, I bought it for 400 now it's worth 500.
0:22:31.080,0:22:37.000
If you're then looking to buy your
next property and you're going up,
0:22:37.000,0:22:43.080
you're going to have the same percentage increase
if the market's gone up anyway. it's actually,
0:22:44.600,0:22:48.520
in that case, it's not really doing you
anything. Yes, it's gone up, but so has the rest
0:22:48.520,0:22:52.640
of the market. Whereas if you add value, that's
different because you're outperforming the market.
0:22:52.640,0:22:56.880
So with this government desperately trying
to demonstrate that they're going to
0:22:57.480,0:23:01.640
have full funding for all
their ideas and projects,
0:23:01.640,0:23:07.360
do you think the idea of this capital gains
tax free home selling is going to last?
0:23:07.880,0:23:13.600
Really hard to second guess, but
it would be an area that they could
0:23:13.600,0:23:19.520
immediately have tax upside. Like an easy
target for me. I don't know what you think.
0:23:19.520,0:23:20.600
Absolutely. Absolutely.
0:23:21.760,0:23:26.040
OK, well, on that pessimistic note, we're
going to end the show. So a big thank you
0:23:26.040,0:23:29.800
to Lucy Waters, Managing Director
of Aria Finance. Thank you, Lucy.
0:23:30.400,0:23:33.880
And to you too, Glenn. Glenn
Jacobs, Director of Next Home.
0:23:33.880,0:23:36.880
Thank you for coming in. Pleasure. It's
been really good to have you both in.
0:23:37.720,0:23:38.800
That's all we've got time for.
0:23:38.800,0:23:43.200
So I'm Stephen Galpin. Join me next
time on Property Question Time.
0:00:02.320,0:00:06.000
Hello and welcome to Property Question Time.
I'm Stephen Galpin, and this is the show
0:00:06.000,0:00:10.560
where you can have your property related
questions answered by our team of experts.
0:00:10.560,0:00:16.480
And joining me today is Lucy Waters, Managing
Director of Aria Finance. Welcome, Lucy. Good
0:00:16.480,0:00:22.080
to see you. And Glenn Jacobs, Director of Next
Home London Estate Agents. Welcome to you, Glenn.
0:00:22.080,0:00:23.200
Thanks for having me, Stephen.
0:00:23.200,0:00:27.280
Right, Lucy, you're going first,
and your question is this:
0:00:27.280,0:00:31.760
Are the banks part of the housing crisis
that we're experiencing at the moment or
0:00:31.760,0:00:38.320
part of the solution? I.e., are
lenders becoming too risk-averse?
0:00:39.120,0:00:45.760
I think we went through a huge transformation
in the market post global financial crisis.
0:00:45.760,0:00:51.360
So that was, I would say, the biggest
adjustment that the mortgage market saw.
0:00:52.320,0:00:58.800
Arguably, and it's always popular for people
to dislike banks and to suggest that banks are
0:00:58.800,0:01:06.000
over cautious and they should lend more.
But I actually am of the belief that the
0:01:06.000,0:01:11.840
change in regulation around affordability
that we saw post-financial crisis was a
0:01:11.840,0:01:16.400
really positive one because we were in a low
interest rate environment for a long, long time.
0:01:16.400,0:01:20.960
And then we've had the recent shock. I
say recent, it's not that recent anymore,
0:01:20.960,0:01:28.640
is it? It still feels recent. And that increase
in interest rates, if everybody was tested on
0:01:28.640,0:01:33.520
affordability on low interest rates, nobody
would have been able to withstand that. We've
0:01:33.520,0:01:38.240
obviously had inflation run away as well.
So people's cost of living has increased,
0:01:38.240,0:01:45.760
albeit there's been some wage growth as well to
try and keep up with that. I think that the banks
0:01:45.760,0:01:52.400
have a genuine desire to lend. Don't think it's
their business to lend. If they don't lend money,
0:01:52.400,0:02:00.320
they don't earn money. There is a
big, I suppose, restriction in a way,
0:02:00.320,0:02:06.080
which comes from the regulator in how they
do it and to what customers they can lend to.
0:02:06.080,0:02:12.160
So whilst it may appear that
the banks are being difficult,
0:02:12.160,0:02:18.480
they have to adhere to the regulatory
landscape to ensure that the loans are
0:02:18.480,0:02:22.640
affordable to people and that they're
assessing them properly. However,
0:02:22.640,0:02:27.680
there's always an element of the market where
it goes too far the other way. And I think
0:02:27.680,0:02:37.520
that's where less of a pragmatic approach is
taken and banks try to cater for the majority
0:02:37.520,0:02:43.520
and therefore anything around the edges, it's
easier for them to not try and push the envelope
0:02:43.520,0:02:48.560
too because the risk isn't worth the reward
for the number of customers that it catches.
0:02:48.560,0:02:54.160
Lucy, Glenn and I were talking off-camera
about something that happened. 2008,
0:02:54.160,0:03:01.120
we had the crash. Yep. And apart from the
property industry, one of the industries
0:03:01.120,0:03:07.920
that suffered greatly under that crash was
the car industry, the motor industry. However,
0:03:07.920,0:03:13.920
2013 to 2016 they experienced the best
boom they've ever had. And why was that?
0:03:13.920,0:03:22.320
Because the financial restrictions came off, HP
agreements, no deposits became prevalent, zero
0:03:22.320,0:03:29.520
percent finance became quite regular and generally
the whole financial field of lending relaxed their
0:03:29.520,0:03:37.120
views and the industry boomed. Don't
we need that in the property market?
0:03:37.120,0:03:44.960
So on the flip side of that, banks have
suffered serious fines and losses and...
0:03:44.960,0:03:48.400
Only because they were paying out big
commissions to people who shouldn't.
0:03:48.400,0:03:52.560
Yeah, but it was it's an example of where
the market gets carried away. So there's
0:03:52.560,0:03:59.200
probably a middle ground, Stephen. I think, you
know, we had the extreme post financial crisis,
0:03:59.200,0:04:03.360
as I mentioned, and then perhaps we went
to the other extreme. There has been
0:04:03.360,0:04:08.160
talk of lifting some of the restrictions.
And I think that that's something that is
0:04:08.160,0:04:18.960
on the FCA agenda. The reality is. Low deposit,
mortgage lending is always going to be seen as
0:04:18.960,0:04:27.600
higher risk. So there are less banks and lenders
in that space than your 25 % deposit lender.
0:04:27.600,0:04:33.600
When we had those low deposits and
low interest rates, the fallout rate,
0:04:33.600,0:04:39.200
the arrears rate didn't go particularly
high when the crash came, was it? It was
0:04:39.200,0:04:44.800
the American markets bundling up these
portfolios of poor property lending.
0:04:44.800,0:04:52.080
I think the reason why we didn't crash is
because we were in an artificial capital
0:04:52.080,0:05:01.520
growth environment because of the availability
of debt. People were able to live beyond their
0:05:01.520,0:05:07.600
means and property prices went up and that
paid for it. So people could refinance,
0:05:07.600,0:05:10.560
they had perceived equity in their homes.
0:05:10.560,0:05:15.680
But it was growing at a rate which was
unsustainable and that creates a bubble.
0:05:15.680,0:05:22.960
So again, I come back to it's not one or
the other. I think house price growth is a
0:05:22.960,0:05:29.120
fundamental part of the UK property market.
But what we've seen over the years is sort
0:05:29.120,0:05:36.960
of spikes over a period of time and then it
might plateau and even go back the other way.
0:05:36.960,0:05:42.320
And that's usually driven by either big events
or mini events. And it feels like recently we've
0:05:42.320,0:05:47.840
hit a number of mini events, which has taken,
mean, you'll probably know more on the house
0:05:47.840,0:05:56.640
price growth situation than me, but I feel that
in a market where house prices are potentially
0:05:56.640,0:06:04.080
retracting rather than growing, for people
to leverage high and be stretched on their
0:06:04.080,0:06:09.440
affordability is a really risky place for them
to be because if something happens there's not
0:06:09.440,0:06:15.520
really many ways out and I think that that is
what the market is trying to protect. Albeit do
0:06:15.520,0:06:22.400
I think we can do more? Always. I'm just not
sure that it's an entirely bank led problem.
0:06:22.400,0:06:26.880
The difference between them and now though is
everything else is so much more expensive. I
0:06:26.880,0:06:31.280
think you've got solicitors now. Solicitors'
invoices are skyrocketed. You've got stamp
0:06:31.280,0:06:35.120
duty now that's more than ever. Rents
are so much more money now. So you've
0:06:35.120,0:06:39.440
got first time buyers that are paying two
and a half grand on rent that are now being
0:06:39.440,0:06:42.960
knocked back for two and a half grand
on a mortgage. It's kind of it's a real
0:06:42.960,0:06:50.160
tough situation to see which way to pivot to.
Yeah, thankfully I'm not trying to work it out.
0:06:50.160,0:06:56.640
So, just to try and answer that viewers question.
Are the banks the solution or the cause?
0:06:58.640,0:07:01.200
I don't think they're either actually. No,
0:07:01.200,0:07:07.920
I don't think they're either. think that
they can contribute to the solution. Yeah,
0:07:07.920,0:07:12.240
I think they can contribute to the solution.
I don't think that they can do it entirely on
0:07:12.240,0:07:17.403
their own. I think there's a lot of other factors
at play for them to be able to make a big impact.
0:07:17.403,0:07:19.680
Become the government then, shall we?
Okay, jolly good. Thank you for that, Lucy.
0:07:19.680,0:07:26.240
Glenn. Well, I hope you can answer this
one. Where do the experts think the market
0:07:26.240,0:07:33.360
is heading over the next twelve months?
And is now a buyer's or a seller's market?
0:07:33.360,0:07:35.840
Depends on the property. I think it depends on the
0:07:35.840,0:07:43.600
property. I think if you if...I've got
open houses. I have people, five, six,
0:07:43.600,0:07:47.040
seven people attending open houses
if you market the property correctly.
0:07:47.040,0:07:52.560
That individual property would be a seller's
property. That's not a buyer's market,
0:07:52.560,0:07:55.120
is it? If there's five, six, seven
people there bidding against each
0:07:55.120,0:08:02.000
other. It's the sort of stock that
would have stagnated. That's the
0:08:02.000,0:08:05.840
different sort of scenario. You've got
a stagnant property on the market. Well,
0:08:05.840,0:08:11.920
why can't you make an offer on it? So it does
vary on the property that's marketed. In terms
0:08:11.920,0:08:18.800
of forecasting where we're going to be, I'd like
to keep a steady sort of scenario with pricing.
0:08:18.800,0:08:23.200
I'd like to see it sort of stagnate, if I'm
honest. Not going down, not going up. You've got,
0:08:23.200,0:08:30.640
we spoke off air in regards to central London
prices potentially dropping by £250,000. It's
0:08:30.640,0:08:35.600
something that's going to ricochet out or has
already ricocheted out. What I've seen and
0:08:35.600,0:08:41.440
what I felt, if COVID was inflated artificially. I
felt like cheap money inflated the prices and made
0:08:41.440,0:08:46.160
them spiral. Everyone was bidding against each
other, and I felt that was kind of the bubble.
0:08:46.160,0:08:50.480
And I feel like now we're kind of they were saying
ten, fifteen percent increase over that period. I
0:08:50.480,0:08:55.920
think we've kind of crept back down to where we
were pre COVID. And I'm happy with that. Because
0:08:55.920,0:08:59.760
I felt like that was the artificial scenario.
Everybody had money because nobody was spending
0:08:59.760,0:09:07.520
anything. Yeah. I would like to see sort of
a consistent pricing element moving forward.
0:09:07.520,0:09:12.080
As Lucy alluded to earlier, I it's
very difficult to judge, isn't it?
0:09:12.080,0:09:18.480
I mean, as people we all kind of Want to bring
it on as far as inflation is concerned because
0:09:18.480,0:09:24.800
it gives us a feeling of security and equity
in our home and always a something that we
0:09:24.800,0:09:32.960
can cash out and take a profit on it in a
tax-free manner as well. But inflation in
0:09:32.960,0:09:40.880
housing is quite damaging to the economy when
it suddenly stops and people go into reverse.
0:09:40.880,0:09:44.960
Especially as you mentioned at times when
things are so expensive. Things around us
0:09:44.960,0:09:49.520
are so expensive. And it's easy to forget when
it's all right when is the government say,
0:09:49.520,0:09:53.760
well, inflation is down to two, three,
four percent, what whatever it is. That
0:09:53.760,0:09:56.240
doesn't mean prices are coming
down. It just means they're not
0:09:56.240,0:10:00.960
going up quite so quickly. So it's quite
a difficult balance to achieve, isn't it?
0:10:00.960,0:10:02.400
Yeah, it already is.
0:10:02.400,0:10:06.240
I get some buyers coming to me when
they're bidding and offering and whatnot,
0:10:06.240,0:10:09.840
because the news and the publication state that.
0:10:09.840,0:10:14.800
Yes, it might be a buyer's market out there. They
are coming to me and saying, Well, why can't they
0:10:14.800,0:10:19.280
accept it? It's a buyer's market at the moment
and using that as kind of leverage. But it's not
0:10:19.280,0:10:23.200
uniform. It doesn't work on every individual
property. Sometimes you dangle the carrot of
0:10:23.200,0:10:27.440
a price to get the interest in it. But it's all
about what you're going to buy next, isn't it?
0:10:27.440,0:10:30.160
Absolutely. Also depends on
the seller circumstances,
0:10:30.160,0:10:34.640
right? If you've got somebody in a distressed
situation that really needs to move. But how
0:10:34.640,0:10:38.640
many offers do you need to make? And you have
to be fairly unemotional in terms of what
0:10:38.640,0:10:43.920
you're offering on. Whereas if you've just found
a property that you really love and you want it,
0:10:43.920,0:10:47.200
maybe there's a few other people that feel
the same way about it. Whereas if you're,
0:10:47.200,0:10:53.040
it just needs to be a three bedroom house in this
area that I draw a circle around. And then you can
0:10:53.040,0:10:57.760
bid on as many as you want until you find that
seller that was really motivated because they've
0:10:57.760,0:11:01.760
got to go, they've got a deadline, they're
moving out the country, their kids moving to
0:11:01.760,0:11:07.040
a new school or something like that. It's quite
different to just offering on someone's house
0:11:07.040,0:11:13.200
and expecting them to effectively give away the
equity that they think they have in their home.
0:11:13.200,0:11:16.800
Yeah, ex precisely. Yeah, but
even sort of further on that,
0:11:18.000,0:11:22.240
that's a buyer's market. That's not a
seller's market at this moment. I do
0:11:22.240,0:11:25.440
always feel whenever I've sold anything
and an agent's come to me and say, Well,
0:11:25.440,0:11:30.560
why don't you reduce the price or whatever? The
quickest test is to say to the agent, Well, okay,
0:11:30.560,0:11:36.640
just show me what else I can buy for the price
you're suggesting I sell. Yeah. And that'll give
0:11:36.640,0:11:39.840
you a good balance of your garden path or agents
do, whether they're right or wrong or leading you
0:11:46.800,0:11:49.120
Anyway, that's all we've got time
for in this half of the show.
0:11:49.120,0:12:00.160
So join me again after the break when I will be
asking Lucy and Glenn, more of your questions.
0:12:00.160,0:12:04.640
Hello and welcome back to part two
of Property Question Time. Lucy,
0:12:04.640,0:12:09.200
how do the panel think that AI will change
property finance over the next decade?
0:12:09.200,0:12:16.320
Do you know, I think you're in one camp or the
other on that and there is no doubt going to
0:12:16.320,0:12:27.280
be lots of change around processing how mortgage
lenders take your application from start to finish
0:12:27.280,0:12:32.160
and the speed at which they can transact that
using AI and obviously then the number of people
0:12:32.160,0:12:39.760
that they need in that chain to do the work. So I
think that's an absolute given and I expect that
0:12:39.760,0:12:45.680
the mainstream end of the market will see the
biggest change because if it's straightforward
0:12:45.680,0:12:51.840
and it doesn't touch the sides, you know, the AIs
bots can do what they need to do. And you don't
0:12:51.840,0:12:56.240
necessarily need as many people sitting there
checking documents and things. That's a thing
0:12:56.240,0:13:04.960
of the past. And these systems check documents
better than humans. So it's undoubtable that that
0:13:04.960,0:13:13.120
will see a big shift. I think the question comes
in a bit more around advice and how AI will shape
0:13:13.120,0:13:21.280
advice, especially when it's something that's more
unique or specialist because there are scenarios
0:13:21.280,0:13:30.880
which certainly to my mind and I'm not somebody
who is completely embroiled in the world of AI,
0:13:30.880,0:13:38.240
so it could be partly my own bias, but I don't
feel that AI can replace the human when it comes
0:13:38.240,0:13:45.760
to the level of understanding of what someone's
trying to achieve and the creative solutions
0:13:45.760,0:13:52.560
that might need to be applied to that. So when it
comes to advice, I'm just not sure that the robot
0:13:52.560,0:13:57.920
can replace the human, albeit there are plenty
of people out there that say absolutely it can
0:13:57.920,0:14:05.440
and it will. So it could be my ignorance
around AI that sort of limits that view.
0:14:05.440,0:14:10.240
I suppose AI could be quite capable
of producing some quite interesting
0:14:10.240,0:14:15.920
sort of stress tests limits and
suggestions, couldn't it? You know,
0:14:15.920,0:14:20.320
it could create various scenarios
for the underwriter to look at.
0:14:20.320,0:14:24.480
Of course, it could check bank statements,
can put it into affordability models, it can
0:14:24.480,0:14:29.920
check pay slips, it can make sure everything
aligns. So from an affordability perspective,
0:14:29.920,0:14:36.240
what might take a human a couple of hours to
read across all the bank statement transactions
0:14:36.240,0:14:41.360
and then plug it into an affordability calculator,
check it against pay slips and then against their
0:14:41.360,0:14:49.680
affordability model. That can be done like that
using AI and lenders are already investing in
0:14:49.680,0:14:57.920
that and brokerages too to an extent, albeit
mortgage brokers are probably behind lenders
0:14:57.920,0:15:03.600
in terms of how they are bringing it into their
businesses, but it's certainly coming. We see it.
0:15:03.600,0:15:08.640
There's certain things that we're doing to help
speed up the process to improve the customer
0:15:08.640,0:15:16.560
journey, but not anything near how we give advice
and how we make recommendations to customers. It's
0:15:16.560,0:15:22.560
very much at the moment around processing, but I
think it's going to change most industries really.
0:15:22.560,0:15:28.800
I suppose one of the questions here is you have at
the moment you have somebody who wants to take a
0:15:28.800,0:15:35.280
mortgage. The general advice to a broker, because
a broker will present it in a better way to the
0:15:36.080,0:15:42.480
ultimate lender than you could yourself. Do
you think that AI will take out that middle
0:15:42.480,0:15:50.560
part of the broker and make the lender again
more directly involved with the borrower?
0:15:50.560,0:15:58.080
Potentially on an aggregator type system. So
I think the reason why people go to brokers is
0:15:58.080,0:16:04.400
not just to put the information together, but
it's also if you go to bank A and you present
0:16:04.400,0:16:08.320
all the information, they might say, absolutely,
Steven, you can have a mortgage and this is the
0:16:08.320,0:16:12.880
price that you'll pay for it. But you didn't
know that bank B actually had a better product
0:16:12.880,0:16:17.600
for your circumstances and bank A isn't going
to tell you that you should check with bank B.
0:16:17.600,0:16:22.000
So what the mortgage broker does is they
look at the whole market and they tell you
0:16:22.000,0:16:26.000
what the most appropriate solution
is for your needs and circumstances
0:16:26.000,0:16:30.880
and they make recommendation. Now if
you're putting it through a system
0:16:30.880,0:16:37.360
that has all of the banks plugged
into it, maybe that is a world...
0:16:37.360,0:16:39.920
Who develops that at that point
though, isn't it? That's the...
0:16:39.920,0:16:47.600
Yeah, that's it. Who has access to it? And what
the commercial bias is and whether the regulator
0:16:47.600,0:16:55.840
would be happy that that individual is putting
all of their information in and getting advice
0:16:55.840,0:17:02.640
or sort of quasi advice from a machine and
not a person. I'm not sure. I'm not sure if
0:17:02.640,0:17:07.520
it goes that far or not. I think there'll be
versions of but like I say, I think the world
0:17:07.520,0:17:14.080
of AI is much bigger than those who are not
completely educated on AI really understands.
0:17:14.080,0:17:17.440
Anything to say that plan? Absolutely. Yeah,
I think it's already sort of transferred on
0:17:17.440,0:17:22.080
a on a micro level the onboarding
of tenants. So same sort of thing,
0:17:22.080,0:17:28.080
referencing, it's almost as strict as almost as
strict as mortgage applications, if I'm honest.
0:17:28.080,0:17:32.400
You've got to get bank statements, pay slips,
previous landlord references, credit checks, all
0:17:32.400,0:17:39.040
of the all of the above on that front. What it's
done for us and me is on a fraud prevention basis.
0:17:39.040,0:17:42.960
So within a click of a button, you're able
to check, okay, well, this person's put this
0:17:42.960,0:17:47.440
landlord as their previous landlord. Straight
away push the button, you can check on land
0:17:47.440,0:17:51.360
registry that if that's the landlord of that
property, because years gone by, I used to
0:17:51.360,0:17:55.120
be able to put a telephone number for any whoever
Harry. Yeah, he was brilliant paying his mortgage
0:17:55.120,0:18:02.480
or paying his rent. That's now has gone by the
wayside. Documents, pay slips and bank statements.
0:18:02.480,0:18:04.800
Used to get all the time. You used
to get fraudulent documents all the
0:18:04.800,0:18:07.600
time passed through. Now within a press
of a button you can check, All right,
0:18:07.600,0:18:11.440
there's a snag there that means so that's not
correct. it can be very hard for the human eye to
0:18:11.440,0:18:19.600
spot that. And in my years doing this, I've come
across it from time to time. And when you see it,
0:18:19.600,0:18:25.520
you can see how many people would not spot the
inconsistency. Sometimes it's that the math is
0:18:25.520,0:18:33.360
wrong to a penny or something. AI will spot
that in more scenarios than a human being.
0:18:33.360,0:18:38.720
Absolutely. Or if they've paid the tax the correct
amount of tax for their tax code on their pay
0:18:38.720,0:18:45.600
slips. That sort of situation that a human eye
go, Okay, whereas AI is picking those things up
0:18:45.600,0:18:51.440
and able within ten seconds of surfing the whole
internet for it. Okay, good. Well let's move on.
0:18:51.440,0:18:57.440
Glenn. Can the panel explain why some
agents consistently overvalue properties,
0:18:57.440,0:19:01.520
only to suggest a price reduction
shortly after being instructed.
0:19:04.720,0:19:05.600
He enjoyed it.
0:19:05.600,0:19:10.160
Have you heard about No, I'm joking. No,
absolutely isn't. Come on, let's do this
0:19:10.160,0:19:14.240
one. I've got to be honest. So, can you
repeat the question one more time for me?
0:19:14.240,0:19:20.960
No. On the basis of why agents do
it, there can be situations where
0:19:20.960,0:19:26.000
you have to portray that you're able
to deal with someone's biggest asset.
0:19:26.000,0:19:29.920
So if you're a cold star and you've got no
properties and I'm coming to your house.
0:19:29.920,0:19:33.200
And I come around and I say, I'm going
to sell your property for the maximum
0:19:33.200,0:19:37.760
amount of money in the minimum amount
of time, expose it to the whole market,
0:19:37.760,0:19:43.440
but I've got no portfolio behind me showing you
what I've done previously or what I've currently
0:19:43.440,0:19:49.280
got on the market or what I've sold, you're not
going to get the instruction if I'm honest. So
0:19:49.280,0:19:54.080
what people tend to do is if they're an upstart,
it does continue on, but if you're an upstart,
0:19:54.080,0:19:57.440
you'll try and take on a lot of properties
and it doesn't matter what price you've got.
0:19:57.440,0:20:01.360
Got them on for because you've got a portfolio
behind you if you check on the on the internet
0:20:01.360,0:20:06.880
and whatnot. Where you have a business plan
though that overprices to get you signed up
0:20:06.880,0:20:12.480
for 12-week contracts with certain corporate
companies that I've been told not to mention.
0:20:16.400,0:20:20.080
Not even corporate companies, but some
corporate companies in particular,
0:20:20.080,0:20:23.760
the problem comes where it's a business
plan to take the property on to beat the
0:20:23.760,0:20:28.080
other agents and then work the price
down over weeks and weeks and weeks.
0:20:28.080,0:20:34.480
You're not servicing, you're not marketing, you're
almost conning someone into a contract with you
0:20:34.480,0:20:39.200
and hoping that you can negotiate with them to
get the price down. That's what the problem is.
0:20:39.200,0:20:44.880
I think as well that it's very easy to win people
over when you tell them what they want to hear,
0:20:44.880,0:20:49.840
right? And everyone thinks their property
is the best property in the roads and it's
0:20:49.840,0:20:54.400
worth more because of X, Y and Z. They
pull up that something sold six years ago
0:20:54.400,0:20:59.760
for that and you're like, well, that became
irrelevant about five and a half years ago.
0:21:01.840,0:21:09.680
it's not an easy one, is it? Because you are
battling integrity versus trying to drive the
0:21:09.680,0:21:15.040
business forward and those integrity
wins overall ultimately, doesn't it?
0:21:15.040,0:21:19.520
There's two other sort of scenarios that work
around that though, in terms of it's so nice
0:21:19.520,0:21:23.760
when you get that phone call back in six weeks
or twelve weeks' time when that agent hasn't
0:21:23.760,0:21:28.240
sold it. It's so annoying at the time that you've
lost out on pricing. And you question yourself,
0:21:28.240,0:21:33.120
you're like, Well, have I actually priced this
incorrectly? But in six to twelve weeks' time,
0:21:33.120,0:21:36.480
that landlord or vendor is on the back
foot because they're coming to you going,
0:21:36.480,0:21:44.080
You was right, like I take your word on board. The
other situation that happens with these agents is
0:21:44.080,0:21:50.080
if you have a full stock list on the market of all
these properties that are stagnant on the market,
0:21:50.080,0:21:54.480
you've paid three, five, sometimes a
thousand pounds for the marketing, photos,
0:21:54.480,0:21:59.440
videography to get that property on the market.
So you'll have, I know of a firm who you know
0:21:59.440,0:22:05.280
of as well, but no name's mentioned, their whole
portfolio has to take 1,500 pound up front yeah,
0:22:05.280,0:22:10.480
1,500 pound up front just for marketing
off a landlord or a vendor. Because if
0:22:10.480,0:22:14.880
you've got 190 properties on the market
and you've done 1500 pounds in marketing.
0:22:14.880,0:22:17.760
You've got that sitting there and
you're not able to sell any of it. Yeah.
0:22:17.760,0:22:23.120
I mean I do know quite a big firm that tells
its young negotiators that if you haven't got
0:22:23.120,0:22:28.000
it on the books, you can't sell it. Get
it on the books at any price. Yep. At any
0:22:28.000,0:22:34.400
price. And we'll deal with the legitimacy
of that price later on. Yeah. You know,
0:22:34.400,0:22:40.546
and to a point, you can see the logic there. If
you haven't got it to sell, you can't sell it.
0:22:40.546,0:22:40.560
So legitimate.
0:22:40.560,0:22:44.640
And by the way, it's exactly the same in the world
of finance. We come up against that all the time
0:22:44.640,0:22:49.920
where somebody has they put a set of terms and
they say, well, another broker's quote to me,
0:22:49.920,0:22:54.560
listen, you're looking at going, just can't
get that. That doesn't work. And then you get
0:22:54.560,0:23:00.960
a call back in three months to say, we got led
down the garden path. And the only thing is,
0:23:00.960,0:23:05.280
and you'll probably have the same,
sometimes they still win the mandate
0:23:05.280,0:23:09.440
because even though they don't achieve what
they told them they were going to do in the
0:23:09.440,0:23:12.800
first place. They've got them on. They're
so far for you, they're so far into it,
0:23:12.800,0:23:16.320
especially if they paid that money upfront. So
they'll stick with them. They'll sell it with
0:23:16.320,0:23:21.520
that agent anyway. And you lost it just by doing
the right thing, which is a challenge, isn't it?
0:23:21.520,0:23:26.640
Precisely, exactly that. Yeah, it's I don't think
it's ever going to end if I'm honest with you. I
0:23:26.640,0:23:30.240
think that you've got a mixture as well. You've
got a lot of vendors that still believe that their
0:23:30.240,0:23:35.600
price, their property is worth what it was before
the interest rate started going up and whatnot.
0:23:35.600,0:23:38.960
Yeah. Okay, well there we are. Thank you
both very much indeed. That's the end of
0:23:38.960,0:23:43.680
the show. So thank you to Lucy Waters,
director of managing director of Aria
0:23:43.680,0:23:47.520
Finance and Gwen Jacobs, director of Next
Home. Thank you both very much for coming
0:23:47.520,0:23:52.160
in. I'm Stephen Galpin. Join me again
next time on Property question talent.
Hello, welcome to Industry Insights, part of our Property Matters show. Thanks to Lucy Waters this morning, who's the MD of Area Finance, for coming along and giving her
view of the property finance market.
Morning, welcome to you. Lucy, let's start off. We've got some volatility going on at the moment, haven't we, with interest rates, borrowing rates, all sorts of things. Where are we?
Yeah, so we've obviously, We've been through a period of instability caused by the geopolitical landscape, and now we've got domestic issues which we're contending with. So it's been a bit of a double whammy, unfortunately, in that we were already dealing with fairly persistent higher interest rates caused by the swap rate market and what's going on in the Middle East. But now we're in a situation where the market has become spooked by what's happening with Keir Starmer and the potential of new leadership, etc. and the outlook for the UK economy, which has led to rising gilt prices and a knock-on impact to swap rates. So we haven't seen a huge rush of rate rises in the market just yet, but we all know that if things don't settle fairly quickly, that that is what we would expect to see next.
And what's this going to do to the market? I mean, is it making life difficult for developers to develop? In other words, housing stock being limited? It really is. I think that problem has been very much there for the last 12 months plus. think we've got land values are still not coming off in the way that they need to enable developers to make the numbers stack. You've got the Gateway 2 issue, which we've talked about before, which is causing big issues predominantly in and around London and building flats and towers, exactly. Then on top of that, there's been some research that's come out this week about off plan sales. So, where the market slowed down generally and units aren't selling as well, what we're seeing is off plan sales, which developers really rely on in order to reduce their holding costs and to offload their stock a bit quicker.
The status something like in 2016, 50 % of sales would be off plan for these bigger units and bigger blocks of units in and around London, et cetera. And now it's at
something like 30%. So that really does have quite big implications for developers. So you've got higher interest rates, land values aren't where they need to be. You've got
the gateway issues and then the fact that the resales aren't there. All the pinch points are making it really challenging for developers in certain areas for certain types of asset classes. I think it's making it difficult for everybody. mean, you're talking to somebody here who made my living from doing off-plan sales for many years, and it was very successful.
There's a very simple rule. As a developer, you'd say to your bank, well, can we have some money upfront? And they say, well, to get your funding, you go and sell 20%, 30 % off-plan and we'll look at funding your development. But of course these days for a young person in particular to buy off plan and make a prediction of what he's going to be able to afford two, three, four years later on when the developments complete, very difficult, very dangerous. And affordability is really tight as it is. So one of the big challenges as well in the market is that first time buyers, the number of products available has gone backwards, especially with a lower deposit products. So that obviously you can see how the circle completes.
You've got the developers that's building the stock, but they're relying on the end user having the affordability and the deposits and the mortgage availability to enable them to buy the units. And unfortunately, the market has slowed down on all accounts. If we get over this geopolitical issue and the conflicts die down, shall we put it that way?
Do you think that we'll get back on a downward path for interest rates? I think the market is broadly positive about that being the longer term trajectory. I think what feels really uncertain at the moment is the shorter medium term because you've got these two things which are fairly acute in the market causing the knock on effect to now, but it can change.
It can change so quickly and so dramatically in the same way that we saw the interest rates spike so quickly from where they were at the beginning of the year. There is still some hope and optimism that that might happen. Albeit, I think the predictions are stretching out for how long it might take for that to start to happen. Do you know, think overall, Lucy, it's such a shame because with, shall we say, rather depressed prices at the moment in the property market. It's probably an ideal time for young first timers to be buying. But if the cheaper finance and lower deposits isn't there for them, it's futile, isn't it? Absolutely. Such a shame because I think this is an opportunity that could benefit the young people of the UK. But there we are, that's life. Lucy, thank you very much for coming in today and sharing your knowledge with us.
Thank you for watching. I'm Stephen Galpin. You've been watching Industry Insights.f our Property Matters series. Look forward to seeing you again
next ti
Hello, welcome to Industry Insights, part of our Property Matters show. Thanks to Lucy Waters this morning, who's the MD of Area Finance, for coming along and giving her view of the property finance market. Morning, welcome to you. Lucy, let's start off. We've got some volatility going on now, haven't we, with interest rates, borrowing rates, all sorts of things. Where are we? Yeah, so we've obviously, we've been through a period of instability caused by the geopolitical landscape, and now we've got domestic issues which we're contending with. So, it's been a bit of a double whammy, unfortunately, in that we were already dealing with persistent higher interest rates caused by the swap rate market and what's going on in the Middle East. But now we're in a situation where the market has become spooked by what's happening with Keir Starmer and the potential of new leadership, etc. and the outlook for the UK economy, which has led to rising gilt prices and a knock-on impact to swap rates. So, we haven't seen a huge rush of rate rises in the market just yet, but we all know that if things don't settle quickly, that that is what we would expect to see next.
And what's this going to do to the market? I mean, is it making life difficult for developers to develop? In other words, housing stock being limited? It really is. I think that problem has been very much there for the last 12 months plus. think we've got land values are still not coming off in the way that they need to enable developers to make the numbers stack. You've got the Gateway 2 issue, which we've talked about before, which is causing big issues predominantly in and around London and building
Flats and towers, exactly. then on top of that, there's been some research that's come out this week about off plan sales. So, where the market slowed down generally and units aren't selling as well, what we're seeing is off plan sales, which developers really rely on in order to reduce their holding costs and to offload their stock a bit quicker. The status something like in 2016, 50 % of sales would be off plan for these bigger units and bigger blocks of units in and around London, et cetera. And now it's at something like 30%. So that really does have quite big implications for developers. So, you've got higher interest rates, land values aren't where they need to be. You've got the gateway issues and then the fact that the resales aren't there.
All the pinch points are making it really challenging for developers in certain areas for certain types of asset classes. I think it's making it difficult for everybody. mean, you're talking to somebody here who made my living from doing off-plan sales for many years, and it was very successful. There's a very simple rule. As a developer, you'd say to your bank, well, can we have some money upfront? And they say, well, to get your funding, you go and sell 20%, 30 % off-plan and we'll look at funding your development. But of course, these days for a young person to buy off plan and make a prediction of what he's going to be able to afford two, three, four years later when the developments complete, very difficult, very dangerous. And affordability is tight as it is. So, one of the big challenges as well in the market is that first time buyers, the number of products available has gone backwards, especially with a lower deposit product. So that obviously you can see how the circle completes. You've got the developers that's building the stock, but they're relying on the end user having the affordability and the deposits and the mortgage availability to enable them to buy the units. And unfortunately, the market has slowed down on all accounts. If we get over this geopolitical issue and the conflicts die down, shall we put it that way?
Do you think that we'll get back on a downward path for interest rates? I think the market is broadly positive about that being the longer-term trajectory. I think what feels uncertain now is the shorter medium term because you've got these two things which are acute in the market causing the knock-on effect to now, but it can change.
it can change so quickly and so dramatically in the same way that we saw the interest rates spike so quickly from where they were at the beginning of the year. There are still some hope and optimism that that might happen. Albeit I think the predictions are stretching out for how long it might take for that to start to happen. Do you know, think overall, Lucy, it's such a shame because with, shall we say, rather depressed prices now in the property market. It's probably an ideal time for young first timers to be buying. But if the cheaper finance and lower deposits isn't there for them, it's futile, isn't it? Absolutely. Such a shame because I think this is an opportunity that could benefit the young people of the UK. But there we are, that's life. Lucy, thank you very much for coming in today and sharing your knowledge with us.
Thank you for watching. I'm Stephen Galpin. You've been watching Industry Insights; part of our Property Matters series. Look forward to seeing you again next time.
So in terms of myself, I actually studied engineering at university, believe it or not. was a bit of a science geek and did a year out in industry. And during that time, there was a bit of litigation surrounding one of the products. So we went to a bit of a legal fair and just was really taken in by it. It seemed really interesting whilst...
the medical and science side interest me, it was too slow. So to get medical product out to market, takes years and years, whereas actually the legal side seemed really on it and fast pace, which is what I love. Not quite as fast pace sometimes as we always want it, correctly. So I then decided I was going to convert from engineering to law and I did that.
Yeah.
Is that an easy process?
It was hard, but I was always somebody that didn't mind to study. I kind of didn't mind the academics because I did have the goal in mind.
How many years did that add on to the...
So it was four years because I did a masters in engineering. Wow. And then I converted into law, which was the PGDL and then I did the LPC. Then I got offered. I actually went for interviews at lots of places and I was interviewed and invited because I got a first in my degree and people in London were inviting me there and different things, but I went down.
And it was very clear to me that at that time I was not, you know, didn't talk the legal language, didn't talk the finance language. I was very much a scientist. So I kind of then went away and applied myself. And in the end I did actually get offered three training contracts and went forward with Halliwells, which is a whole other conversation itself. My boss had seen what was coming and he actually put me
in a, on secondment at a lender called Davenham finance, Davenham trust. And they, like many lenders at that time were having a lot of issues with back book problems, shortfalls, negligence. And he put me in there on a secondment. So as a newly qualified lawyer, I had my own client. I was then headhunted by DWF, which is another large law firm.
And they said to me, we are going to replicate what has happened for you at Halliwell. So you can come to us under our umbrella, but basically you're going to be seconded in to the client. Went to DWF and then we did the same thing at Davenham. And then I was then called by Henry Moser to get the money. And he called me direct and just said, have you heard of me?
And how did he come across you, do know?
Yeah, I do actually. It's quite a funny story. So basically what had happened, a team, let's say a team had sold a recovery element for a lender into Henry. So we're going to come into your business. We're going to help you with all the problems, which every lender was suffering at the time because of the climate.
And this is our recovery team and the recovery team is X hundred thousand. Henry being Henry obviously knows what he's doing thought who is actually doing this recovery? Who's the person doing it? Right. It's the lawyer behind this. So he just reached out to me direct. So unbeknown to me, somebody had packaged me up as a team to sell me into Henry and I didn't know.
This person then got earshot that Henry had contacted me direct and then wanted to bring me in. Come, come and have a look. Come and have look at the spreadsheet. Yeah, it was amazing. So I went in to Henry, had a couple of interviews, met with Mark Goldberg and came out and spoke to my dad and said, I literally feel like I've been on X Factor because yeah, he just blew every...
single offer I had at the time. I the law firm I was with at the time, they were kind of saying, can, you know, we can develop you. We're going to send you on these insolvency courses. We're going to do this. We're going to do that.
incredible.
This was just quick.
yeah. he, but you know, the law firm, unfortunately, law firms work, the big traditional law firms very much now work on formulas. Everything is so rigid. What can people earn? They don't look at the actual individual and see, what has that girl actually brought in? What are her connections? What are her client bases? How is she performing against her peers? I was just told, well, you're already ahead of your peers.
You know, we can't go any further. We can't, you know, offer or increase your package. We can just develop you. didn't, you know, for me, I just thought, no, this is too rigid.
your own worth. so we went to together and had a great time there, work directly with the top directors, had great experience. it, we built a recoveries team there, recovered a lot of problems, but also I was involved in front end transactions. You know, when a deal came in that maybe didn't fit the box, you know, we'd speak about different ways around.
So just for the benefit of anyone listening, so your initial experience in the property law side was on the back end as opposed to helping deals to complete and get over line and doing the conveyancing. Yeah. So you worked with lenders if a loan went wrong. So if a lender had had to take possession of a property and they were trying to recover their money, if it got complicated, you would get involved. Right. So then
the value then that you would add at the front end was the almost like the benefit of hindsight in advance because, okay, it's a different loan and it's a different scenario, but they're saying this has come up at the front end. If that becomes a problem, do you foresee that being an issue at recoveries at the end? Is that what you're saying? Is that?
And I've just seen the time that I, so my start was together in maybe 2010. And obviously I've been part of the lending world very closely and worked with a lot of lenders. The development I've seen, obviously not just from what I've seen when things go wrong, but just through like improving processes and procedures and tweaking the documents and
It, you know, I am a very commercial individual and I think I've got both sides because of working with lenders. So even though you would probably think, this girl's going to be a deal stopper. She's, you know, seen it when it all goes wrong. It's not about that. It's about like, how can we get this right? So yes, that might be a problem, but actually we can mitigate it by X, Y, Z.
And what I would say there is sometimes when people don't understand or people think you're being difficult or obstructive with the borrower solicitor and we're actually all on the same team here. You know, we want to protect the lender's interest, but actually it also works for the borrower purchaser because if they get stuck with a piece of land that's landlocked or has some encumbrance.
Perhaps the lawyer acting on their side hasn't spotted it. So sometimes, you know, two heads are better than one. And this is definitely something that I want to come back to your experience and what you see go wrong and how you can mitigate it. But will you just take us to today? How did you get the point?
So, sorry, so I got to, so we're together, amazing experience. And I was offered to head up the law firm that does all the work for Together. And I said to myself, if I'm going to do this, and obviously setting up a law firm is a lot of responsibility. You really have to know the people that you're in business with. I'm going to do this myself.
which was huge, you I remember.
didn't want to be tied to anyone. You wanted to be able to be free and...
Yeah. So what was really the universe looking after me or, you know, me just being very, very lucky was, whilst I was together, Henry and the team would also recommend me. So they'd say, you know, to a client or somebody who was having trouble, use Kerry on that case, like he'll sort it for you. And we had some gentlemen who had invested
four million, let's say, with their accountants. They'd worked with their accountants for 15 years, trusted them implicitly, and they'd been told that they were going to earn something like 9 % a month on this investment.
Which was this into loans or what was the underlying investment?
They had just put the cash, put their cash in to the accountants who were
so they'd invested in the farm.
They'd invested in, you know, I actually don't think they even had that detail. I think it was kind of a bit.
A lot of money to invest blinds.
And they were going to give them a 9 % return on their money a month. Just mad figures. So they brought this to me and I said, this is ringing massive alarm bells. We'll send a demand. If they don't pay by this date, we need to go for it. And they were like, no, no, trust these people. I was like, we really have to go. Anyway, in the end, they did push the button after I made it very, very clear.
that they were going to be at the back of the queue if they didn't. We ended up getting judgment against them and we actually got a worldwide freezing order and we got restrictions and charges, sorry, charging orders on all their homes. So they had all homes. I think they had one in the wife's name and one in their name. And when it came out,
They had done this to circa a hundred million pounds worth of clients. So the fraud was huge. And my clients were the only ones that got paid out. It was such a sad story because you had wives who had trusted these accountants. They were widows and the husband's money had been invested with them and they'd lost everything. But by the time...
Amazing.
the official receivers office got onto it. So the insolvency service, obviously it had all gone and it had all been dissipated. Whereas we had these tangible property assets, which let's all face it, that's the best way to secure anything. So I was paid, they were paid. And I was in a situation where I set up to go back to my journey where
Obviously I didn't know what was going to happen with me. I did take around 170 cases when I left from together in terms of their litigation work, which was amazing. But having this huge case that I did meant that, well, the first day Lauren and I raised our first bill in the practice, which was, we sent a bill out for 20,000.
which for me back in 2014 was a lot of money.
No overheads, guess, really, because you were a small business, you didn't really have anything.
Lauren and I, small office in Winslow and within an hour or two hours it was paid.
Such a nice feeling is that you log into the bank and you see it there and you think, this is mine, I've this.
It was amazing. then I just thought, because up until that point, and that was very early, I just remember every morning getting ready to go into the office thinking, right, if I don't make a single fee, I can carry Lauren and I for a year. And, know, I had a bigger team at the time and there was a girl that worked for me who's fantastic. And I said, Han, commit to you, you know, so you've got this job offer. was DLA.
And I said, you know, just go do that, get your experience. said, you know, hopefully this thing will thrive and then you can come back. And she did come back. But at the time, it's such a massive pressure. Is this actually going to work? And I remember just thinking of my bank account doing that. That situation happened. And it just meant from there on in that...
The type of work I do, and I think the reason how I've distinguished myself is people don't like paying when they can't see results. And a lot of the stuff I do, they're already out, they're already, you it was a bad loan or there's a contract that's gone wrong or they've lost money somehow. So to keep spending on it when they're not seeing results, it just really pains them. So
I've always come up with a way, you know, depending on the deal, right, let's see how we can work this out between us. but just having that case that went so well with the clients from London, meant that I wasn't desperate to anybody paying a bill and nobody could kind of look at what I was doing as a start-up and think, we know she's just died up. She's going to be desperate for this fee to pay.
You actually started with a pipeline, didn't you, which is a fantastic position to be in because most people don't start with that and they have to go and find it. So it sounds like it all segwayed really nicely. Yeah.
Um, and then we gradually built the team, got busier and busier. Different lenders would come to us when they heard what we were doing. Um, and had various proposals to kind of be bought out at different times, but I just really didn't want to go back into the big law firm situation. Um, maybe in 2017, there was six of us and now
2025, I think there's 28. So yeah, the more we had these relationships with lenders and they could trust us and could see how proactive we were and our communication, which is just key in what we do. We then started to win the front end work and that has just...
you
So now as a business, do you do more front end than you do back end? Yeah. You do? Okay. That's really interesting. Yeah. And how have you found that transition? Have you personally enjoyed it? Is that something that now you're pleased to be on the other side of the fence?
Well, we still do the litigation recovery work because obviously with all the front end work that we do for lenders, the lenders trust us with the back end. And I think they do like you were discussing earlier, they like the fact that we can see the front and the back end deal. So for instance, one of my girls that's worked with me for about 12 years, she had years of experience with me at the back end and saw all the issues come up.
court in front of judges, how they looked at things, you know, different rates and renewal fees and everything, how it was worded in the documents. Now she's front end transactional work and she's doing phenomenally well at that. for me personally, yeah, it's, it's, you know, I think the front end work is very positive. Everybody is really focused about getting a development off the ground and
You know, it's very positive part of the transaction, isn't it? Whereas the backend, it's things have gone wrong and we're looking at all the different ways of recovery. I'm lucky that the lenders I work with do adopt a really sensible, fair approach. Basically, if you work with us and make some effort to cooperate, we'll work with you. But it's when people just bury the head.
keep living their life and their lifestyle and don't think they owe the lender. And I think, you know, the whole, the media didn't really help, you know, when we've had past media about bankers and all the rest of it and banks are baddies and all this type of thing. It's like, actually, no, you've had that cash in your bank and you've used.
Yeah.
I suppose the foundation of it all is there's a contract, right? Yeah. So if you sign a contract and you agree to something, then the lender has every right to enforce the contract as for what's written in there. And I think it's then clear for everyone. No one's trying to vary that presumably.
And that's really, for me, I do feel quite spoiled with the work I do because exactly what you say is a contract and it's very clear. know, sometimes people approach me with litigation and it's oral agreements or, you know, emails going back and forth and uncertainty. And actually I think in a lot of situations, a lot of friendships, a lot of...
Sometimes they don't actually govern it with a contract thinking, we all trust each other, all friends. Like, you're not friends. When money's involved, it goes wrong unless everybody's clear on how it
Yeah, yeah, I think it's very easy for people to fall into that trap, but you've seen it go wrong too many times, I guess. And one thing I'm keen to understand is then so you predominantly do lender work. So you you have you do client work on the front end as well, or does it tend to be lender only? The clients, so, OK, fine. So you've got quite a global view then of all of it. You've sort of acted across the whole triangle. So when
When a borrower is entering into a loan, obviously in most scenarios, they have their own solicitor as well. And sometimes it can become quite fraught, can't it? And it can be really challenging. Why do you think that goes wrong? What do you think we can do to try and make that whole process just a little bit more amicable and joined up? Because ultimately the outcome that we're all trying to achieve is successful completion for client and lender.
and then a successful journey thereafter. So are there any like bits of those components that you think that we need to really address?
For me, I've always, when I've ever picked up a new case, obviously it's back end, but when it goes wrong, but picking up the phone, you know, I think we rely too much now on email. I think actually having an initial call, well, we're both working on this together. I want to ensure this is a good, this is good security for the loan, for my client.
They know.
Building a bit of rapport.
You want to ensure your client can develop this land and use it how they want. We're actually doing the same thing. Because if my due diligence and I don't check off my boxes, the reality is that your client's going to come unstuck because they're not going to be able to exit when they want. And it's going to be costly for them. And I think having that conversation at the outset, because I do feel I'm very lucky with my team. We have a number of people that have worked
actually in-house with lenders. They understand lenders. I've also got all the back-end people who have kind of got the multifaceted with the skillset. But sometimes you come across property solicitors who are property solicitors and they don't quite, they're dabbling. They don't quite get how it works in lending. So when we're asking for things, they think we're being difficult or just too onerous or, you know, I mean,
We're dealing with a situation at the moment where there's been a fraud on a case where actually a solicitor was embedded in both the borrower's firm and the seller's firm. And he had an interest in both. We were taking warranties and undertakings from the borrower's firm. We were asking for vendors certificates on the identity of the vendor. But you get a lot of pushback.
You know, people, law firms are like, why are we giving you this? You know, we'll carry out our own checks, we're solicitors, you should take our word. And you should be able to. If this protects all of us, why wouldn't we just do it? Because unfortunately, there are people out there who will look to commit fraud. And actually it's not, it's not really about us getting one up on each other. It's...
It's like...
just about us trying to do the best to make this transaction safe for everybody. So I do think at the outset, you know, a call, trying to build up a bit of a rapport. It's always, I mean, you'll hear this, oh, it's with their solicitor. Oh, it's with their solicitor. And it's just like, guys, just get on the phone, find out what's missing and let's just pull this deal together.
Yeah. And actually as an intermediary, what we find is we get really involved in the legal process and not all brokers do. Some just sort of leave it to tick along. But whenever I get the call, which is 50 % of the time, say the lender's lawyers are asking for ridiculous things and they're making the process really slow. and I say, okay, no problem. Can we break that down? So I can't, I can't make a call and say,
you're asking for too much, you need to ask for less because where do you, what do you even do with that? But what, what is it that's being asked for? Why is it problematic? If it's something that you can answer and solve in two seconds flat, then just do it and humor them and let's not talk about it anymore. But if it's something, I mean, one thing that will come up time and time again is where they have to request information, which is outside of their control. So it might be like ground rent.
service charge and they're relying on a third party and it's slow. Sometimes there's other ways to deal with it. And I think for you guys, I guess you're always asking, you want to protect your clients. So you're asking for what you need to see in an ideal world, but there might be something that just suffices that sits below that. So rather than just being frustrated with the process, we always say to people, tell us what's causing you a problem.
let us see if we can then find a solution that makes the lender comfortable enough that you can provide within the time scales. And I think that's the bit that almost is missing. You get the, why do you need this? And rather than trying to find a solution, people are very quick to just point out the problem, which doesn't really do anyone any favours
No, and we'll have, we've had so many situations when it's gone wrong in litigation and nobody would ever have foreseen that what we asked for, what we now ask for, we could have asked for them, but we didn't. So, especially the lenders, especially working with brokers like yourself, we all want the deal to happen.
you know, the quicker my guys get the deal through and completed, the better for me. everybody's on the same team. And I do think that's why we are different because of our experience. Unfortunately, sometimes it is, I feel sometimes we do get pushback when we have maybe solicitors that are a bit defensive. They don't quite understand why we're asking.
Do you think that's experience thing? Yeah. Cause we, that's one of the problems that we come across time and time again, where a borrower has a solicitor and you're looking at their credentials and their experience. And you think this is a solicitor they've known a long time and they might be a really good family generic solicitor, but actually if they haven't got experience in the niches of the market that they're operating in, can really slow the transaction down. And I think.
Choosing the right solicitor is actually key for borrowers and how to make that journey smoother. Is there any advice that you would give on how a customer can make that selection? How do they find those people in the market?
I mean, I was thinking about this myself the other day because obviously it's all about independent advice, isn't it? That there not be a conflict. But I don't think there would be any issue with there being a list of, that we generated between us of solicitors that we have worked with and we've just smashed that deal out. You know, we've worked as a team.
everybody's cooperated. Yes, there's been issues, which, you know, there are those solicitors out there and when we get one, fantastic. And actually, obviously you say there's no obligation, but one of these guys, if you use them, we will probably get this deal done very quick with Graphene. but yeah, for us, it can be really tricky when you have people that, they are defensive.
Yep.
because of experience sometimes. And my guys, you know, they will go above and beyond to explain and go through things and explain why. But again, it's, if they don't have the confidence in it themselves, it does slow down the transaction.
Yeah. And what advice would you give to a customer when entering into a loan agreement? mean, let's sort of hone in on short-term finance, so bridging development funding. What advice would you give to customers to look out for? Obviously having seen things go wrong at the back end. What, like, what are there, is there any pieces of advice that you could offer to a customer to really make sure that they've checked their facts or been diligent on?
So, obviously actually go to the site, walk around it. Have we got any problem? Neighbors? Is there anything going on there? You know, you wouldn't believe some of the nuisance or I had a client once who was developing a site and he had a lady who would lay down in front of the bulldozers when they were trying to do the right of way to the
think there was six beautiful houses been built. You know, I mean, it's just, is really extreme stuff. And usually the stuff is extreme that I deal with.
unusual
And actually in some scenarios, things like that, you probably can't legislate for that because it's a unique.
No, but in this situation, there were other...
The easement, the right of way was going through their garden, which they'd bought. So I do think maybe if some conversations had been had with the neighbours, which then actually gave us witness evidence that we took to court in the end, they told us this woman was an interesting lady. So, you know, obviously that is a very extreme case planning. You know, don't underestimate
how long planning can take because I don't see it as much now, but I'd say maybe 2010, 11, 12, the amount of people that were taking out finance and not understanding that planning was not going to come in six, seven months. That really hurt a lot of people. Cashflow.
really good advice.
You know, don't underestimate how much things cost with builds. When you go into the ground, when building a property, you discover all different types of issues that crop up that you were not aware of. You know, you might have done the investigations and all the rest of it at the start, but always put in a contingency because it will always take longer.
If you're developing, always use a project manager, quantity surveyor. You know, sometimes I think people come along and the market is so much more sophisticated now. The lending is so much more sophisticated now. But back in the day when these roles didn't really play a part, it was catastrophic. And the amount of times I would see drawdowns happen and actually what
Yeah.
what works happened, you know, what we're drawing down against. But for the developers themselves, it actually saves them money in the long run. If they go in default one or two months, obviously they need to factor in the cost of interest and look at their loan, the bridging loan as an employee. Look at it as a cost of the project.
Don't look at it as negative. If you want that plot of land and you can see the profit in that plot of land and you want that plot of land tomorrow, and you've got the relationship with the lender that you can make that work. Well, go, but be realistic and factor in the cost as a cost of the project. And sometimes I don't think people really do that. They kind of see it, obviously it's a burden, it's an obligation, but it's
put the whole thing into context, but unbelievably that's when you see deals fall over when they haven't, they try and save money at the start, but they come unstuck at the end.
Yeah, and I suppose a great deal of what you see actually happens to good people, right? Not everybody's not everyone's out there to cause a problem or, you know, obstruct the lender. Sometimes things just happen. And I suppose from our perspective, good advice all around is crucial to make sure that people make these decisions properly at the outset, because it can shape the whole future, can't it?
I mean, it's really sad when you see the things go wrong. But as I say, I think that was, I do think everybody has become more sophisticated in how we do things. I do think everything is a lot better, a lot more thorough. know, since and after COVID, feel like valuations are a lot more accurate.
You know, we've learned a lot of lessons, I'd say in the last 10 years. And I think that as it always should be, as it always should have been, you are dealing now with the sophisticated property investor or developer. Whereas before I do think we had a lot of people not taking it seriously. And you know, it is.
It's an amazing way to make a lot of profit and it always will be, but it has to be done diligently and properly.
Yeah, like anything, those that the most professional end of the market will usually prevail. One thing actually that I wanted to cover today was looking back on your career, obviously, you've had a really interesting career and you've had some twists and turns. What advice would you give to young lawyers that might be interested in the property sector specifically?
Yeah, 100%.
So they need to stand out now more than ever. So solicitors generationally, feel that kind of our generation, I'm older than you, our generation, we were in the crowd that we'd be in the office for seven. I'd the office till one o'clock. I'd be working all weekend.
Yeah.
My boss emailed me on a weekend, it'd be on my laptop.
It's almost become a little bit unpopular that, hasn't it? I think the work life balance movement, if you like, where people are focused much more on like lifestyle and health and mental health and things like that, has definitely made a lot of the younger people coming into the market a bit dubious about that way of working.
And you cannot sugar-coat it. As a lawyer coming in as a junior, if you want to get on and learn and develop, it takes a lot of time because when we work for you or lenders, you expect speed. So the reality is that one of my highly trained people would take 10 minutes to do it. But a junior who wants to have a go,
It might take them five hours. You know, I say to everybody in my business, you you want to become a lawyer, you need to understand.
Knowledge is power, isn't it? Yeah.
understand it, read about it, why are we doing what we're doing? Don't just fill in a form or copy somebody else's. No, you don't.
still see that grip. you have young, do you have.
Yeah, I do. And, you know, for instance, one of my girls who's a trainee solicitor, just a weekend gone, we had a lady who was filing injunctions left, right and centre. A loan had gone wrong. We obtained a judgment and were selling properties in auction. And we've tried to...
deal with this guy for well over a year. We've entered into settlement agreements. He's not honoured anything. I think now the guy's just thrown 20 grand at a solicitor and said, stop, make their life hell. So, you know, literally going to court over the weekend and, you know, my girl with me was working on it all weekend to the point where I had to say, now because
could tell this solicitor was not going to get anywhere with the judge because it was all ridiculous. But the point was she just had such fire and passion and that's what I look for. So in terms of, know, it's, if you're asking a more senior person within the business to train and develop you, when they give you a job to do, that is work for them because
what she was doing.
you know, nine out of 10, you're not going to get it right. So that works going to then have to, you're to have to train them and develop them. And if you've just made a 20 % effort at it and not 110, the person won't use you again. Your development will stun. So when people come to work for me and you know, I do take people on at the junior level a lot. And I do say, if you impress and if you work hard, there is not
for a training contract and to qualify.
And, know, some people come in and don't and that's fine. And they'll do their job that they want to do. And lots of businesses need all different types of jobs, but the lawyers or the trainee lawyers who are going to come in and, you know, give me that 110%. They do really, really well with us. I'm really, you know, really proud of the team, but now because of AI and all these different systems that are coming into play.
they've really, really got to get moving and take on as much information, as much skillset, as much commerciality, because the reality is, I don't think AI is going to take over, you know, people like myself that have got all the experience, all the knowledge and the actual practical hands-on experience. Whereas for those juniors coming up through,
A lot of the jobs in five, 10 years, I think they'll be gone. I do.
Really? Yeah. Yes. That's one of the things I wanted to cover today on the AI front. How are you implementing that if at all? And what do you think it can do for your business?
We're doing loads of it. So we probably maybe a year, 18 months ago, maybe a year actually, I investigated what was out there for kind of law firms. And I did find an AI package, which has been constructed by top property lawyers. And it will help us generate reports.
now the way that it works, not yourself, but say if I went and asked, I don't know, someone off the street, highly intelligent person, but somebody off the street to do a report on title for a lender, they could not do it because they don't know what to put into it to get the answers out. so you do have to be,
knowledgeable and experienced. what it does is for instance, when you've got a 200 page lease to read, which we would have to read that cover to cover, it will do that. It's basically like having a really good second year trainee.
And can you fully trust it? Like, can it make mistakes that you rely on? That's what I worry
It makes mistakes. So it, that's what I mean by a second year trainee. So you would always check it. And one of the tools that
So where's the benefit then? If someone, it does the work for you, it summarises it, but then you have to check it anyway. So where's the time saving?
So the time saving is because we will have key issues within a lease that we have to look at and we can click on the answer that the lender will have asked. We can click on the answer and it will take us to the exact part of the lease that says. And so it will go and then within seconds we're at the relevant part of the lease. Yeah.
just a bit quicker.
But sometimes when we read it, we're like, interpretation just isn't quite right. But I'd say 70 % it is correct. So it will definitely be saving time, totally it's a first draft. isn't a five-year qualified lawyer. We're also looking to develop
Mm-hmm.
within our case management system. Obviously we're really lucky with the lenders we work with like West One that despite the dips in interest rates and all the volatility and the rise in interest rates, we have really had great performance constantly because we just, you know, the lender is constantly being super innovative with the
products that they're putting out there. So for instance, now we have just probably in the last nine months started doing a lot of the residential work, which obviously historically we're a backdoor recoveries litigation firm. Then we've kind of done the front end securitization bridging development. And now we're developing on the resi side and the resi work is completely different.
because of the types of people that are buying property.
That's more box sticky, isn't it?
It is, but I think people think it's a lot more straightforward than it is. And because of the extra like regulation and all the rest of it. you know, these people want their hand holding, they're buying the first property. It's their main family asset. You know, it's very personal and emotional to them. So as a business, it's all about managing the communication. And so we are investing a lot in how we can.
make that communication slicker and better. And these systems now, these AI systems, I mean, it blows my mind. leave it to it, but they can literally pull and look within your case management system. Look at what the last email was sent, what was said, what we're waiting on. can review a contract and like answer questions.
Very different.
On the residential work, because it is a lot more, the fees aren't there on the resi work. So I need to come up with a way that makes that type of work more efficient. Cause at the moment can't employ 10 people to pick up the phone constantly to people on a deal where we're 500 pounds plus back.
Yeah. And that's obviously just the pressure from fees because you're dealing with end users and that it's not a transaction to make money. It's a, it's their home and therefore there's more sensitivity. Yeah. Yeah. Yeah.
And my, you know, the team that I have, and you know, it's head up by one of my fantastic girls that worked for me, Danielle, who just works tirelessly and she's so passionate about it. You know, she will do everything to make sure that person has their house when they want it. And so she's very personally invested in it and she brings that out throughout her team. So my hope is that...
If I can get the AI side of it and as well, know, automation of documents, which is a bit boring compared to all the rest of the sophisticated AI stuff. If we can get that side slicker, then they'll have more time to kind of have more contact with Danielle or Emma or all the different people in the team. Whereas at the moment, obviously it's, it's a lot of work on these transactions, which isn't really justifiable.
Kerry, thank you. That has been really interesting. I think we could talk all day, but we're going to have to call it a day for now because I think people might get fed up of listening to us. But thank you so much. Honestly, it's really interesting to see your story and how you've come through the industry and created this amazing law firm. Thank you for sharing it with us today. And for everybody that's listening, thank you for listening to the specialist scoop and we look forward to seeing you next time. Thanks.
Welcome back to the Aria Finance Specialist Scoop podcast. I'm here joined this time with Colin Horton from Project and Co. surveyors, a leading surveying brand in the business and valuation is such a hot topic at the moment for borrowers, lenders and brokers alike. Really good to get your insight. Thanks for coming, Colin. Colin, for those that don't know you, maybe don't know your business or don't know sort of your standing in the market, tell us about you. How have you got into this? Why valuation?
Okay, I'll try and condense it or bullet point it as much as I can. I fell into valuation, fell into asset management and grew my career in that space, predominantly specialising in lease-line enfranchisement, which is very niche and very boring. Government got involved and that market just went completely quiet. So I had to evolve and there was an opportunity in lending that I just thought, you know what?
it could be done better. I decided, know what, I'm going to give this a go. Obviously I don't look like you're typical surveyor. I don't talk like one, that's for sure. And you know, I'm not from, you know, London, I'm from Essex and there was, there's a little gap and we basically just went guns blazing the marketing, absolutely smashed LinkedIn and just delivered really good service really quickly, really efficiently and just focused on communication. Fast forward to now
We won the Bridging and Commercial Best Surveyor which was absolutely huge for us in our first year of doing this. I've gotten the Bridging and Commercial Power List, which is also amazing. And they gave me a great photo, which was even better. And we're just really trying, mate, to really kind of make headway in what is a really difficult sector to infiltrate as in a sector where there is so much risk.
Yeah, and also so established people can be really stuck in their ways. I see that from a finance perspective too. How quick was the learning curve then in a sort of first full year of trading? How, if you look back from month one to month twelve how different are you guys?
So the actual business itself has been going for six years and we hadn't done valuation. We were just focusing on building pathology and everything that comes with that. I thought initially we actually originally jumped into it probably about two years ago. And I thought I can do secure lending. It's just Redbook valuations, easy peasy. Got enough kind of capital in the company to invest in some good people. And I'm very blessed, I'm very good at selling myself and...
We have to get people from your big kind of corporates. That's what I told myself. And we cherry picked some really good people who I trust wholeheartedly. And that was it. We just went to town, mate. And we just started like meeting people. Brokers were a big thing for us because brokers, my fiancé is a broker. You guys go through a hell of a lot and it's difficult. you know, I think brokers have cried out for years for valuers who are there for them as much as the lenders, you know, it's not.
you guys ultimately choose us on the panels, you know.
Let me bring it back. One thing that was really interesting is you're talking about from the outside, you've looked at valuers maybe not being able to be held to account on their figures and justifying it. How do you, how are you doing that differently? What's the, what's the tone of Project and co?
So my tagline, which I have, think I've tagged now for nearly two years consistently is every single day is surveying with personality. And that's been a big thing for me. I think having the ability to communicate with brokers and lenders and you know, a deal comes through. What a lot of time we do with our broker clients or say clients and referrers is they'll come to us initially and say, Col, I've got this deal. Can you have a look at it? And I'll have a look at it. And if I think it's crap, I'll tell them, I was like, don't do it. This deal is rubbish. And I want to help make a difference in the set. So I want lenders to lend well.
and I want you guy brokers to earn a lot of money. And I think we are such an important cog in our ecosystem that I think us as value is forget that. And that's why I was so passionate about just trying to change it.
Always looked at the whole specialist lending proposition is a puzzle. There's a jigsaw and you don't solve it with one element and one arm. And that includes I'm reticent use to use the power term phrase cause I don't love it, but it's not just about having good tax advisor and good legal team behind you, but
You're lending, valuing, broking services have to align, have to fall into place correctly to make a deal work. And it's not just about getting the numbers, right. It's about the pace, about the delivery and the execution of that. And, you know, that does take beyond all else. What it takes is good communication because I do agree with you that the down valuation term is funny. I've not thought of it. You're right. A valuation is a valuation The downfall is in the eyes of the beholder. Correct.
With good communication early and justification of why does a borrower think it's worth X? Can they justify it? Have they got some comparables? Can they value or immediately go, no, I can tell that's wrong. Well, that sounds okay. Let me go and look at it properly with my expertise. Can brokers catch that early? Can lenders say, no, that's a nonsense. And can we make that journey more painless? And it does take everybody. It's not just one person, right? So you have to work with a lot of different people in the system. How do you manage the balance between managing borrower broker lender expectations.
So, you know, as percentage, my day is mainly spent talking to brokers wanting everything urgent. Urgent has really lost its power as a word, you know, and I think valuers in nature aren't combative, you know, in their personality types. They're generally, they're not trying to stereotype, but valuers aren't necessarily the most outgoing people as a profession.
so, you know, having the confidence to be able to stand by your valuation and to tell a broker ain't going to be like that or to tell a lender it's, you know, it's not a great deal. Don't do it. Or actually I'm actually really struggling on the comps, but I actually generally do think this is worth what they're in a pan. And, you know, it is, it's, it's really difficult. I mean, applicants, luckily we don't have too much interaction with them. Luckily, you know, and when, when we do have interaction with them, you know, it's on site doing the inspection.
But a lot of time it'd be agents and stuff there. you know, but lenders, you know, from my experience with lenders and underwriting teams, you know, the BDMs are great, but it's the underwriters that have all the power. You know, and you have to get on side with the underwriters. Underwriters will make a call pretty quick based on the quality of your reports and the style. And every lender has a different risk profile. So there are certain lenders that actually really want to lend money, you know, and they're a little bit more risky. I don't say risky, just a bit more, you know, commercially minded if want to.
It is funny how quickly, you know, firms get a reputation for, for misvaluations, right? Even if they're not down, that they're misvaluations, you get some of your high street types and I won't name names, but people attached to more vanilla lending will go out and come back with no values on great performing buy-to-lets or HMOs or assets that maybe have a slight flying freehold or something unusual. And they go, no, not suitable for mortgage lending. Whereas a huge part of the market might be okay with that. You just have to pay for the right valuation, the right red book, proper report, nod
I've driven past and I don't love it type of
These guys, mate, they're doing six, seven valuations a day. It's smugging all the term stuff. Bridging, is bloody off. They're doing seven a day, like on the high room. And they don't care. They're emotionless. There's no... The reason I've got so passionate about it is because I was set in a property once, my own personal residence that I lived in. It was quite an obscure property in terms of that it was a converted post office. And it was like three-floor flat. And there was no real comps for it apart from the flat next door it sold.
Hang on exactly the same. Anyway, value came out and they knocked it by like 50 grand and it sold it on the first day to the first person at the right price. And I had to like, I just cannot understand that you're, this is 50 grand, know, to someone to save 50,000 pounds. Yeah. You're talking a couple of years or whatever to do that. Yeah. Like they don't, I think a lot of them just take their emotionless and I think there is more to this game than just that, you know, and
Maybe I'll shoot myself in the foot when I say stuff like that, but you know, for me, it's...
What are people's misconceptions about the role a valuer plays? What do people assume you do that you don't where, where they maybe come at you for, if you can impact things.
I think they just assume that like, think they generally think that we actively either, depends how they view us naturally, but I think we're to down value stuff and just so the bank can lend less money or better a better term or whatever, or other brokers out there just see us as people that they can manipulate and try and get decent figures out of. And you know,
Over the last year or so, I've become so much more aware of that. I'll help and give advice where I can, but I just don't take the mic. There are a lot that will call you outside of hours, call you at 7, 8, 9 p.m. at night. I'm fine for that. But don't take the mic. Don't ever ask me to put my career and my firm on the line.
Yeah, yeah.
And I guess that's the, in terms of, you know, for people watching, what, can you do to give yourself a best chance of good valuations? guess it's being selective and honest with the pressure you're applying then if it's urgent, say it's urgent. If it's not, let's get it done. Right. Not rushed. I presume that helps you anyway.
Correct. For me, the biggest thing I hate is when we get instruction on the matter. And I've gone through the valuation before with said broker or whatever. I said, look, based on what you've told me, You know, initially, I think you've got a good chance of this stacking up. I can't guarantee it, but I think you've got a good chance of it stacking up. You end up going to the property and it ain't what they've told you it is. You know, you've got like 22 people in one bedroom, you know, and I'm just like.
And again, ethically, how I grew up, it's a matter close to my heart, and I was like, I don't like people taking the mick out of the system, you know? And it's just having that transparency with me at the start. You know, and how realistic is this? Do you honestly think it is actually worth it?
That impartiality, how, how do you maintain that? Just staying honest to the numbers, just finding a way of justifying it.
Yeah, you have to remember that everything you do, it can get ordered, you know, ultimately. know, if everything, anything got, God forbid was ever to go wrong. Luckily we've never had anything go wrong, but if it was, you know, there's going be paper trials, there's going to be everything. So you have to, you have to make sure that you're, you're treating both sides fairly. You know, that is the, obviously the applicant and and the broker or three sides the applicant, the broker and the lender, you know, all I can say to, to people listening is with your value of treatment, respect, you know, and if you do get a down val there probably is good reason.
for it, but obviously speak to other brokers, have communication, see where you're having success. There are some really good firms, not just my firms, there are some really good firms out there, valuation ones. There's some ones I don't necessarily like as well, but it's just having that communication, those relationships. And I always recommend having relationships with maybe three or 4 different firms, just that by all means message me and I'll tell you who. And it just gives you the best chance of getting the best deal for your client.
Communication is such a big one. Actually, on previous episodes, one thing we've talked about with others is the benefits of communicating well with your lender when you're in the debt. If something's going wrong, if you're growing your portfolio, if you're thinking about changing stuff, the same with your company structures, liaising and communicating with good tax advisor, your accountant, making sure you're on the right track. And it's no different, right? I think sometimes the valuation process is seen as a necessary evil. I want this money and to do this, I have to part with this cash and they have to give me a number.
And hate it. And actually, if we communicate honestly and transparently, then we're more likely to get a fair outcome that we've got eyes on early,
100 % authentic and transparency in this game is absolutely paramount to getting the results that you want. And for us as, like, I'd love to think that as a broker, will you speak to me on the deal? You can honestly tell me what we're actually looking at here. So when I do go there, I've got no shocks and no surprises. Cause the last thing I want to be doing is delivering you bad news and it hasn't stacked up on what, you know, I think it is. you know,
I'm fortunate at the moment, nine out of 10 times, it isn't the number that the applicants put in. I've got quite used to delivering that bad news, but it's the way you handle it and giving them a heads up. There's been times where I've started valuations up, we've actually taken the fee, I've actually inspected, and I can quickly see like that, that it's not gonna start and I've stopped. And I've just called up the broker and said, look, I'll refund you, because this isn't gonna work. And I think that goes a long way, it doesn't necessarily help the bank balance for us, but.
you know, ethically for me, that's how it should be done.
Yeah. And it matters to the borrower, right? Cause ultimately the end of all of this, there is somebody trying to buy or remortgage property who's spending money on the professional services around it. And you want to make sure it's the right process, right? Yeah. That's a good thing. Taking a step away from some of those challenges. What are some things that if I was a borrower tomorrow,
needing to remortgage, I'm confident I've got a good asset. What can I do to my property to make it attractive in the eyes of a valuer or in terms of that'd be good for resale that would go quickly? What are some of the bits you look for that stand out as?
So for me personally, the kitchen is always the biggest, the biggest room for me. It's always the biggest draw. It's the most expensive room in the house. Obviously if you haven't done your kitchen, you know, it's just obviously very obvious things that can tidy up, cover any imperfections. I mean, I shouldn't say that.
before you go on with that, how often is that not the case? I mean, tidying up feels like a really basic bit for me, but I've had to tell clients before, make sure it's clean.
It seems obvious, doesn't it? I'm not expecting like, know, sparkling, but just make it smell nice. Smells a big thing.
saying that because some people are going, look past that, look at the numbers, but that's what a buyer would think. Right. That's the human instinct of you walking in. That's what a potential buyer would think. Correct. The reason a lender gets a valuation is in case they have to take the property on and if the case they have to sell it. Exactly. That matters.
So that gardening, like just keep your front, you know, just keep it externally. As soon as the valuer walks in, they're to be looking at it and they're going to say, this is maintained or not. So it's all about like the psychology of how much someone values something. And it is, it's a very good point is how much, you know, if you're going to buy it, what would you be looking for? What would put you off? And that is the best way to do it. You know, there's no kind of rocket science per se. We often get asked about valuation packs and stuff like that. I like them personally.
It's nice to understand where the applicants come from in terms of their valuation. Yep. Sometimes if I'm in the mind of the applicant, sometimes it helps me with this. Sometimes it's a little tricky kind of, and don't make the mistake of just pulling right move comps that are on the market.
What people giving to you there. that's a good thing because people not some borrowers might be new to this or might not understand. You're talking about somebody presenting you with a pack of their rationale as to why they think it's worth this before you look and make your views. So what in there is useful?
So for me, obviously I know full well that nine out of 10 lay people will just go on Rightmove up for sale, high to low, pick the ones that cherry pick that suit their case. I don't, unfortunately for them as a valuer and for RICs we don't really care about what's on the market for sale. We'll use it as maybe a secondary or kind of third resource if we're not sure on a value.
But we look for sole comparables, ideally within the last 12 months, ideally within kind of a kilometer. It's again, the way I twitch it back to everyone is if, I value it as if I was gonna buy the property and that's how applicants should look at it. Try and take the emotion out of it and say, look, if they were gonna buy this property themselves, what would they be looking for? And that's a really simple way of doing it. But you'd be amazed that people don't do that.
They always just send me for sale on Rightmove high to low.
the time, which you're discarding basically immediately. Correct. Yeah. Okay. That makes sense. Yeah. What, what sort of stuff have you seen recently that's particularly interesting? I mean, you must've been in some wild properties. What have you seen in the market at the minute that people are transacting on that is interesting, that is different. That's caught your eye.
I'm really enjoying the care sector at the moment. Only this morning I was working on a valuation of nine flats that are being converted into basically serviced accommodation for children with disabilities. And the yields are unreal. And it's a good cause, you're helping kids that are suffering. But I'll try and keep the numbers as rough as I can, but.
The contract over these nine flats is worth about £200k a year. And the actual rental amount, if you were to rent them was somewhere in the region of about £80k . There's a huge swing. I think, care is probably going to be the new HMO side of things.
there's a middle ground already, right? Because from our side, we probably see it maybe more than you do. Maybe you're less aware of those contracts in, the social housing sector. So they look like HMOs from the outside, but it's the contract and the strength of the lease. that's sort of that hybrid in between care and social sort of responsibility, but also private rental sector. It's an investment.
I've got one myself.
It's unreal mate and it's solid. A lot of others don't like those five-year contract, which surprises me because it's really secure. generally in the contract is to put back as was when they took the contract.
Yeah, secure tendencies as well. They're great. And actually, if you do get that, it's an interesting one for me as a broker placing these deals with lenders and getting buy in, you know, the fix and repair clauses and making sure that the, properties handed back to you in the same state you hand it to the provider is vital and gives you a level of protection that you didn't have before.
Making sure a lender can get vacant possession. They have vacant possession rights is really important. And then actually qualifying who's going into the property to make sure a lender has the appetite, but they are great. It's a great return. It's doing some good, you know, there's some panels recently housing for good. It's a really nice tag and so it's good, it's a good model and they're valued the same way, right? You're still just a property from a valuation perspective. It's an asset that someone can hold and can reinvest, can sell, can do whatever they want with, right?
100%. And what I would say is, especially the example I had today, is make sure when you are going to put in your application that you have got the lease kind of signed already if you are going into that, because a lot of lenders that we work with don't really accept kind of hope value. So the hope that it's going to get signed, you know, so what I'm good telling me that you've got 200 grand rent coming in, but unless it's signed, I can't value on that premise. So that's just one thing.
Do make sure that you, if you've ever put in applications in that you can cross the T's and cross the I, that makes no sense. So yeah.
And that leads onto something that's a really hot topic at the minute because valuing yield based valuing in general, there's loads of education out there in the market at the moment. Lots of property mentors talking to willing borrowers, keen borrowers about HMOs and moving into the HMO game. And it's not just buying ready-made HMOs because a good HMO isn't on the market. People are holding them. It's converting single dwellings into HMOs.
They're often taking short-term finance to do that on the promise of a commercial valuation at the end, being able to pull all their money out. Now that model is absolutely possible, which we've covered in previous episodes and generally in the market, but you're not always guaranteed a commercial valuation on a HMO.
We've talked about it with lenders before. What, from your perspective, would give you a stronger case for recommending the commercial valuation on a HMO property? What are the sort of criteria?
Yeah, so I mean, obviously the amount of rooms obviously is paramount. I think the lowest we've done one on is five, we have done them on five and sometimes that is the right way of doing it, know, it's just, you know, but generally we're looking six, seven or above. I can never say it properly, but sue generis how ever you say it?
You know, but ultimately the things that we look at for whether or not it should be applied as a yield is we look at the quality of the, you know, the conversion, how much material change has actually gone on to the property. Because a lot of time if it's had six ensuites put in, it's quite a substantial amount of change. So take it back to a house. Bricks and mortar doesn't really apply to it. It is going to be an investment method. The quality of the operator is now getting factored in a lot more. So we are often asking our lender clients, what's the history of this applicant?
Because obviously it is very hot topic, everyone's kind of jumping on it, but if you haven't managed the HMO before, how do know you're gonna be any good at it? And obviously the proximity to strong employment bases, i.e. hospitals, town centres, big kind of corporate blue chip client, that kind of stuff, doing really well. Actually where I'm from in South England Sea is a prime HMO area. It's really strong HMOs. And obviously don't expect...
generally really strong yield if you're a HMO investor and you do not take care of the rooms and the clients, like that will get factored in for us. And we are seeing that a lot, you know, and a lot of time they're over-rented and they are putting people in squalor. So I sound like some, you know, evangelical valuer here, but you know, it doesn't help. If you're putting people in decent, good living conditions, chances of you getting a better yield are going to be stronger because the risk of obsolescence is a lot lower, you know, and what I mean by that for anyone who doesn't understand is, you know, with HMOs, there's a lot of people coming in and out. So naturally there's going to be wear and tear and damage and stuff. And I think what a lot of people forget about HMOs is it's all well and good to get that really lovely, sexy refinance, which we all want. But, you know, because so many people come in and out, probably every seven to ten years, you have to redo it all again in terms of decor, new bathrooms and kitchens, etc. And it's not cheap.
You know, so just I know HMOs is really exciting, but just make sure you do research and obviously speak to great brokers like yourself and just make sure you know what you're doing, you know, because you are very much and you couldn't be... Of all the property investment opportunities, HMOs are the most dependent on the valuer on that exit. It's all about the exit.
For sure, if you've done the conversion works yourself, you're absolutely right, because everyone's hindering on the massive uplift.
They don't sell, mate. There's no, if, that is the worry for me, if I'm honest with you. I look at the market and I think, okay, it's been valued at this on an investment method. So, value is a business fundamentally, but my God, they never trade anywhere near what they're getting valued up for. And we are not the only one in the sets that's raised this. know a lot more lenders are pulling back a little bit on investment. But lenders are doing it, understand it and get it.
Cause it's interesting. Cause look, that's important to hear because if, even if your view is naturally overly negative, let's just say, let's say you're on the more pessimistic side, you're a valuer. So that matters. And the market is full of people with lots of confidence and being brave and finding ways to go into a deal going, I'm going to get an investment valve. I'm to get a commercial valve, but they need to understand the risks, right? That it can be a six bed HMO, which is not guaranteed seven bed is different because if you've got a sue generis planning, it's the it's different anyway, but
If you're a six bed HMO, it could go either way. And it sort of is on the valuer and then the lender's interpretation of the value as comments as to whether they grant you that or you're back to bricks and mortar.
Our instruction always come through bricks and mortar and or investment. And that's how it comes through. Now we do do investment method, like we do it all the time. Based on vendors, what they want us to do and if we can find the evidence we will. But it is arguably the hardest part of valuation because there's no evidence.
Must be this everywhere right it's still really you must see a lot of this
Yeah, mate, I reckon at the moment, we are maybe doing one - two a day HMOs. We are doing investment, but you know, is just don't, when you're doing your calculations before you speak to yourself, like just make sure you kind of speed a bit more conservative. If you get a lower yield, great. But just be careful with it, you know, don't, because I've seen people go, you know, they spend all of their money hoping to get like a 8% yield or I don't know what, you know.
Yeah, it doesn't surprise me.
What they're expecting, but say an 8% yield, it might come out at 9 or 10. So the tip is always to speak to your broker and just find out what lenders they're having success with that are doing, know, it probably won't be us, but what lenders are doing, who are having success with the valuers that are that they're doing good yields. And he's got to kind of play the game and work it backwards. Because a lot of lenders, there are a lot of valuers that will just absolutely tank it.
Do you think, does it make a difference for you and your valuing if it's within Article 4 or outside? It does it indeed.
Indifferent. mean, more and more, mean, non article 4 is becoming rare. Yeah. Yeah. Now, the one we've done today was just outside of alien and it's got article 4 coming in December. And it does make a difference. Of course it does because it means ultimately it's going to be less HMOs, which is, know, for the HMO owners, a better thing. Of course it is. And, and given the way the UK economy is at the moment, I think HMOs are a really good investment despite my pessimism. My pessimism is purely on the exit. Yeah.
And you know, just, I just don't want people just taking out all of their money all the time, you know, and then leaving themselves.
Good model and within article 4 more chance potentially of that commercial valuations.
yeah, 100%. If it's article 4, I mean, me personally, if it's six bed, article 4, you're going to get an investment method valuation out of me. Yeah, that's how we work. you know, like said, we have done some five beds and, know, after discussion with lenders, we'll call that the lender and say, look, very limited bricks and mortar, you know, comparable to here. ensuites massive material change here. So, you know, my personal opinion, you this should be an investment method here because someone is going to come and buy this and just hold this as an asset for maybe a generational asset.
And how are you finding lenders - I mean, lenders are so varied. I mean, like, it is nuts. Like, cannot like what you think one lender loves, you go to another one and they don't like it. you know, and it's, there is no hard and fast rule for them. We've tend to find that certain lenders will be known for doing HMO stuff and they were a lot more receptive to having the conversations.
And broker should probably be engaging with those as well, right? If everything has gone right here, the deal has already landed at the feet of the right lender, the right product, the right valuer and everyone's in the loop on what we're looking for out of this. What sort of tips would you give brokers, any brokers that are in the market to work better with the valuer?
Good question. Like I said, don't be, for me, authenticity is a real big thing. You know, and I've become friends with a lot of brokers over, know, last couple of years. And I think value is do see through that surface level facade a lot of the time. So cultivate actual proper general relationships with valuers and so much so that you can
If that valuer tells you that it's not worth that, you trust them and you don't push them and that's what it is. Cause that's the type of relationship you've got with them. You trust their opinion. And just don't, I can't swear again, but like just don't, don't bull them. Just tell them the truth. Don't lie to them. Don't let them get there and be embarrassed. Cause ultimately as well, a valuer, we don't love having to find a number. I think the valuation game would be so much better and completely different.
if we weren't told the sums. So real valuer is running blind every single time. be wild west, but I'd actually be fascinated to see where value stack. Would it be higher? Would it be lower? I have absolutely no idea. I suspect it probably would be lower, but it's... and that'd be better.
Yeah, broadly. It depends on the sales. If you've got obvious sales comparables, you'd like to think you're going to land on the obvious number and no one would have over egged that as well. But I think you're probably right. Yeah, it makes sense. If you could change one thing about how valuations are managed in property finance, what would that be?
It's you're always working to a number. It's weird.
So many things, I think the main thing I would say is that I think lenders generally should have a diverse panel of valuers, know, so the broker gets it. Don't get told just to use one valuer. I think there should be three or four that they're told to use. Obviously you've got Methan and Vass, which are great as well. But I think having a diverse team of professionals for lenders is huge.
You know, some might sit on the more commercially minded side. Some might be ultra cautious and there's a space for both. Yeah. And doesn't mean the ultra commercial guy can't be ultra cautious. Of course, of course they can. It doesn't mean vice versa. So what I would say is I think for managing valuations, think lenders should really take note of who the people are that giving them the work.
That makes sense. There you go. Well, that's a good one. One thing that's interesting is you talked earlier about urgency and borrowers are urgent. Everyone is urgent. Everything they did doing yesterday. Do you think across the industry that delays in surveyor availability are actually, just property access, is that still a major issue?
Access is a pain in the backside. It's really hard. I can promise the world to you. You could say, Col, can get someone tomorrow. I could go there tomorrow. And, you know, it doesn't mean be able to get in or people and a lot of time where it's HMO for arguments sake Yeah. Nightmare because there's five different people in there. Yeah. You're in. Yes, there is an issue with access and dates and times that kind of lot of that comes down to RICs requirements because you have to have you know, a chartered surveyor go and do the inspection.
I have my own personal views on that. don't actually think that should be the case. think people are very capable of, you know, you can train someone very highly to go and do, you know, go and do a survey. But obviously we can't adhere to that. We have to do, yeah, you know, how to send chartered surveyors around, which is fine. And that's what causes the delays a lot of times. So that is the, it's just the bureaucracy that comes with, you know, not the RHS, but you know, just in terms of the Redbook requirements and stuff.
Was going to ask you how do you mitigate those problems? I mean, access is one thing that's an organised borrower, right? Making sure that someone's ready to let you in. Payment. Okay. That makes sense.
A lot of lenders will be like, don't go till they pay. Don't go till they pay. And then the broker will be like, you not paying? I was like, well, they haven't paid. Yeah. They're going to pay. was like, well, it's all good to say that. But we do an evaluation, they don't like it. Yeah. They could go, you know, and the cost to actually chase debt as a business owner, as you, you know, don't know you got a broker you may carry bad debt, it's a nightmare. You know, it's not worth it after time to chase the debt. Yeah. And they're the two main ones. And some just information, tenancy schedules. Yeah. You know, planning documents, schedule the work.
So the bit that matters here in terms of tenancy's schedules as well, I'm guessing if you've got headline numbers that, and the point for people to be aware of really and consider you might have granted access really quick. You might have let someone in, they've taken all the pictures, done the visit, but if they're trying to do numbers, algorithms, comparables, and they're not armed with all the facts, you're shooting blind and you're more likely to have an inaccurate valuation. Whereas actually if you provided all the passing information, that'd be much easier.
More information we have as well as the quicker we can get the job done. It's really simple. So again, that comes down to the brokers in my personal opinion. should be, cause they, you'd be worried if they're submitting applications and haven't got that. Having that themselves. And like I said before, applicants lie. Just be honest from the start, you know, and also other stuff like when it goes like, obviously it's a bit more of the broker side, but just, just lying about all the backend stuff like credit and stuff like that's going to cause delays. you know so just.
Bye bye.
If you're an investor or developer, just be honest. Treat brokers like lawyers. Tell them everything off the start and then you just speed everything up.
Do you think there's a rise in lenders out where there's borrower demand for this, but there's also lenders trying to get there where technology is coming into the valuation process. We're seeing a lot more AVMs, which is an automated valuation model or desktop valuations or a snapshot of a figure for somebody to then action and borrow against. How is that helping or hindering the process overall? What are your thoughts on that?
AVMs, some are good, some are bad. We're actually jumping into that space ourselves, building on one for brokers to kind of find out feasibility beforehand. So I do see a value in it, but I also see how it can muddy the water, soot the current values for arguments. You know, the simple algorithms, they tend to just work off the last sold price and then apply land registry house price data to it. You know, and it's not necessarily doesn't take into account the wider market.
No, there might be an absolute banging comp that sold three roads away that is absolutely perfect, but it's not necessarily going to take that into account. Yeah, sure. So I do fear, not fear, fear is the wrong word. I'll be free if can do something else. But I think it is going to become more more prevalent. AI is huge now. mean, we use AI a lot for kind of dissecting information, reading reports and titles that you know can quickly.
We use AI for our first stage of our audit before we send the reports out. So we've got customer AI that will review our reports, rank it out of hundred and tell us where we need to be to get it to a hundred. So that's what we do at the moment. So we kind of trying to lean on it as much as we can. But you're going to see it more and more. I generally do think the lenders that push AVMs are going to get a lot more work. It wants to do that. And desktops have become more more important as well, I think. But then as a broker, if your client's coming to you saying I want AVM or desktop, just...
it would raise a couple of red flags for me.
Do you think we'll ever get the, the technology that's able to, cause the beauty of the AVMs now is that they work for single dwelling assets, straightforward houses, whether it's a home mover or maybe easy Buy-to-Lets much more difficult to look at the HMO market. And that's taking away from like commercial valves, just just bricks and mortar, because the work you might've done might not be factored in or refer jobs and things like that. Do we think tech is coming that can take that into account? That can help move that, that sort of arena quicker as well.
Mate, I've thought about this so many times. The issue we have with it is, valuers don't tend to love to share data. So if there was a data set of all the valuers, and then we'd happily participate in this as our firm, where your valuation of HMOs gets put into a data set and all the other firms put there, that's when you start to collate some nice real data, which would be quite easy at that point to populate an AVM.
And people like your big firms, you know, knocking out, you know, two, three thousand about a year. They could probably start doing it now. We can probably start doing one, but obviously the more data you've got, the more accurate it can be, you know, and you can look at bricks and mortar. You can look at investment methods, you know, and the way the reports are, know, especially with AI now, it picks up keywords. So can quickly see condition was poor, yield adopted 10 or, you know, so it can be done for sure, but it needs collaboration in the sector, which is easier said than done.
Chance mate. yeah. would, if anyone wants to share with us, we would do it.
Yeah, okay. Interesting. Well, you never know, right? Down the line, will innovate and they always sort of have proven that they can do stuff like that. I'll put you on the spot to sort of wrap up. What's going to happen to the property market next 12 months, next 18 months, property prices up or down? What do you think?
I, it depends on what happens with the Labour government at the moment. I won't go too much into that one. But I think commercial is going to be the big trend. I think a lot of people are going to mixed use and title split. And I think that's where the money is.
You're the second person on this podcast series to say that think commercial is. Yeah. and residential property value, think potentially stalling.
I know my stuff .
Stalling, do you know what, things that are priced right will sell. Just because things don't sell doesn't mean the market slowed down. It's because agents are desperate to win work. And the easiest way to win work is to over price something. And as soon as you tell someone the price, they've got that money. And if they don't get their money, they've lost that money, but they never had it. But if you actually looked probably at the actual transactional numbers, it's probably just quite a nice steady rise.
So, people when you hear agents, market is rubbish. It's not, it's just because you've been lying to people telling you you can sell something for more than what it's worth.
Well, that's interesting. So market slowly on the up, but more conservatively than people maybe are looking at it. Correct. But you think of diversification into mixed use commercial, slightly different propositions, maybe the move forward.
Correct, mate, stuff like PD on stuff like that, know, ground floor, retail, adding in an extra flat there or not. That's what I've been doing now. I think it's time to be creative and don't necessarily believe all the trainers that you see online that are telling you you can do, buy a property with no money and stuff. Like you still need to have some money to buy something with no money generally. So just be careful.
Yeah, which is absolutely great advice. And one thing we're trying to do here is educate from good people in the market, transacting really well.
So it's really interesting. It's been super helpful. It's been really good having you as well.
Thank you again for watching. Thanks to Colin and Project and Co for giving up their time and giving some great advice for you guys in the market.
Tune in next time to catch up with more.
Welcome back to the area finance specialist scoop and a little bit different episode today because I'm joined by our managing director Lucy Waters. I've had the pleasure of working with and for Lucy for almost a decade now. And um and beyond getting sort of stuck in the nitty-gritty of the day job, sometimes it's nice to take a step back and talk about the market and how we think things are changing.
But I wondered whether we should start with a bit of the background from that period of time where we rebranded, brought the businesses together, created Arya Finance. We're approaching at the time of filming our third anniversary, our third birthday. But I mean, how was that for you?
Because you walked away from a brand that you'd started on your own, right, to do this.
Yeah. Do you know what? It was definitely an emotional roller coaster because, you know, you and I had spoke about it a lot over the years. The direction the business was going to go in. Did we at some point retire the Vantage brand? And I think when you when you've started something and you feel close to it and actually it's not even just if you started it because I know that actually you were very connected to the brand as well. And I think that you put blood, sweat, and tears into something and it becomes quite emotional rather than transactional.
So we it had been something that had been kind of floated around for a long time, hadn't it? and to make that leap and then actually when you make the decision because indecision is the worst thing of all things isn't it? If you're if you actually say right that's what I'm doing all of a sudden the conviction changes and you get quite excited by it and that was very much what happened.
It was actually look at the opportunity look at the things that we can do with this new brand and we've got some different expertise and some different cultures and you know there's great opportunity here. So, we were genuinely excited by it and then we laid all the plans and we had our launch date. Um, it was September the something. I can't remember the date. It was early. It was supposedly very early September. Yeah. In theory, sit was 18 months of planning to get there.
Yeah.
And it was and it was for a Monday naturally because it'd be weird to launch any day but a Monday. And then the queen very sadly passed on was it the Friday? Was it the Thursday? The Thursday before we launched, we had the champagne on ice for our for our launch and then the country was in morning was the, Yeah. kicked us out a little bit, didn't it?
Yeah. So, we decided we decided to recede and um we thought, what could possibly go wrong now?
That's about as bad as it gets, isn't it? And then good old Liz Truss decided to do probably the most worst mini budget known to man.
Destructive. Really destructive. Particularly for our space as well, right? Yeah, absolutely. And do you know what on reflection and I'm not going to get into politics because I think that's a dangerous topic, but actually the probably what they were saying wasn't wrong, but it just created this massive bang, didn't it?
And the market changed overnight and it was the speed at which it changed which caused the disruption. So we were we were there ready to go and there was no choice at that point. You know, we were doing it and off we went. But it was a real shame because the excitement of launch and the opportunity that we had seen became a lot more about firefighting and trying to damage limit.
And there were a lot of people out there who really suffered in that time and lost money because they had they had deals pulled on them and then things didn't fit anymore.
You've got transactions going through and offers were pulled. It was it was actually looking back on it, it was aside from the financial crisis, it's one of the worst points in the industry for me.
I think it was the I mean it was a baptism of fire as a firm, right?
But I do think one of the challenges then was the lack of education for borrowers about why it was happening in the background. And very quickly, our whole industry seemed to educate themselves a bit more on the mechanics of lending and pricing and how products are created.
And it's probably one of the long-term silver linings. that we have a far more involved and educated broking space to support borrowers and give better advice as to when a rate is good or how quickly should you move or are you really in fear of or at risk of losing a product but it was really tough wasn't it? It was um it was a very uh hard time to launch.
But getting through that, how did I mean I I know sort of my thoughts on this anyway watching lenders react and the lending space. There was a lot of bad press. I talk quite a lot at some of the direct borrower road shows we go to where we meet landlords and developers. People always talk about, well, the banks were greedy. The banks did this. The banks pulled my rate. The banks screwed me over. And it's probably the wrong rhetoric right? because actually banks were just trying to not go under themselves because their cost of funds had gone up. Yeah.
And I think that being balanced and knowledgeable actually really sets you apart in the sector and and you know we will have seen and I know that I certainly did lots of brokers who would support that narrative because it bought them favour with customers and I think in life there's a lot of people out there that think that if you tell people what they want to hear that they will like you better and that you will do better from it. But actually, I believe completely the opposite. And I think you have to stand up to what's right and what's true. So perhaps there were some people that didn't enjoy the conversations that we were having over that period where we were sort of saying, "Hold on a second.
This isn't fun for anybody. They haven't pulled this rate because they want to see you in financial detriment and they want to see you pay more to their gain.
This is a case of they can't write that loan at that pricing because they will be underwater and I think that there was probably a huge education well not probably there definitely was a huge education on hedging in most lending businesses and some did it really well and some did it really badly and then there was of course everything in between and I think shaving the last what 15 years or something being in a really benign interest rate environment lenders didn't they didn't really have to worry about that and they all had their hedging policies. So by hedging for those that aren't aware it's about how they fix their money and their cost of capital and how they make sure that what they're lending their money at it they can say yeah that's what we're broadly borrowing at. Otherwise, they price something at a certain rate and then their cost of borrowing comes in much higher and all of a sudden it eradicates not only their profit margin, but in some cases their ability to meet overheads and it puts them completely underwater. So, it's just impossible.
I mean, sensibly timed hedging enables a lender to not have to move the goalpost as much, which actually when we take a step back to what do landlords, developers, property investors trying to make good decisions in the market, what do they want? They want clarity on what they're getting to make sure a deal works for them and to see that through.
Yeah.
And it was that cue for that back end of 2022 where things moved so quickly and was so volatile that nobody had security in the words on paper and the numbers on paper and I think a lot the problem is a lot of lenders they didn't know that their hedging policies weren't going to stand that test because they had never been tested in that way. And with the benefit of hindsight it's easy to see.
But there is also a flip side of that that if a lender overhears and they fix in too much and then costs go in the other direction then that can be expensive for them as well.
So there's a balance to be had and I think that it was just a very challenging time and for those who could understand that yes okay it you know it's frustrating and it in some cases cause people some huge amounts of grief but I think we all had to just work together and that was the message that I was always putting out to clients that look this isn't the lender trying to make a quick buck out of you and I actually still to this day don't believe that that was happening at all.
Um, and there were some that were sharper in terms of if interest rates went against them.
Their products were gone within the hour and you can't blame them at the end of the day, lending is uh it's a market to make money and that's what a lender shouldn't be criticized for that. So, it was it was really difficult. But then on the flip side, you know, we are we're there to support clients and over the years, we've had some clients who have been with us for a really long time and watching what they went through was really really tough and it it's kind of like it's just a product of the environment that we're in and there's not much anyone can do about it, but it's just about understanding the challenges and doing the best to support and I think our team did that exceptionally well. You know, I was about to say the one thing I look back and I reflect on that period of the I say the late nights as if that stopped, but the all the hard work that went into all that work. I'm incredibly I know you share that sentiment. Proud of the team for the care in each deal. Yes.
And it was never just a transaction and nameless faceless transaction. It was people's careers and livelihoods and personal homes as well as investment properties. So I think I think we pushed through that as many firms did as best they could.
Yeah. I don't think the guys were actually desensitized to it in any way, you know, even as it persisted.
You could see the real anguish within the team when they weren't able to honour a rate for somebody and they had given it their best and they had escalated it to me or to you and they had said, you know, can you really try and fight this case? But ultimately, if it put a lender underwater and there just was there was nowhere to go with it. A lot of hard conversations were had in a in a three six month period.
Yeah. Took the shine off a bit, didn't it?
For sure. Yeah, it did. Yeah. But we got through it and I think you know there was the borrower sentiment I think started to education spread and word spread about well this is the new normal and this is why it's happened and people started to understand and ultimately you couldn't expect lenders to sell a£10 note for eight pounds because if we lose lenders in the market we all suffer for it. So actually good lending options are important.
But moving past the doom and gloom of that particularly six months, but it was longer than that period really, we saw a real fight back from, and it's my favourite thing about the private rental sector anyway, is landlords agility and resilience and how they find opportunity in a higher interest rate environment. And it was really interesting.
And we saw lenders react to the inception and the innovation into higher um arrangement fee products with a lower interest rate to counteract some DSCR issues. And there's still some myths around that, but we've seen lenders fight back to try and support the bro borrowing market. Right.
Yeah, absolutely. And look, the market had to evolve because with the return that a lender needed on a buy to let loan, the adjustment in rental income was never going to come quick enough.
Parents are catching up and I think what we're seeing is that the demand for the really high fee lower rate is still there but it's probably not quite as severe as it was in the earlier days but that product still very much has a place in today's market and it's funny I even now we're what two and a half years probably post those first products hitting the market we still get borrowers saying love the rate don't like the arrangement fee yeah do you want to talk about I mean as an education as a base level strip it back to basics why is that not the focus on these products.
Do you know I find this conversation absolutely infuriating because it's not the borrower's fault it's what they're used to and I you explain it and you kind of do the math for them to divide the fee by the length of term and then you give them an alternative with a higher rate and I think for those who have borrowed over the years these sorts of fees are just alien and they think that it's madness and it's really difficult to educate because I think people they hear you and they nod and they go yeah but I still can't pay that fee it becomes so problematic when someone's got that mindset because ultimately you're going to pay the same because the lender has to achieve a certain hurdle to make it make sense to lend that money.
And I think a lot of borrowers think that it's just a choice that lenders are making like you know we want to just earn more and more and more but actually we obviously see on the other side where lenders are really cutting their margins quite thin to compete for volume in a really saturated market for sure. I mean that's the myth isn't it? The myth is that the higher arrangement fee means they're making more money. Actually to dispel that sort of unequivocally. It's the same amount of money. Yeah.
Just broken up into a different sort of pot. Yeah. Is sort of a fair way of describing it.
And I think that perhaps the broker community were grateful for that piece of innovation, but perhaps the borrowing community were less grateful for it because it the adjustment year their rates have still gone from say somewhere between two and 4% depending on what end of the market they were in, what type of product they were doing to kind of between five and a half seven. Yeah. Um and they see that as such a big rise as it is that then they can't get their heads around the fact that the fee has also doubled at least.
And it looks tricky. It's a it's a difficult one. But I think over time as that just becomes all people have ever known in the same way that low interest rates all people ever knew, it will start to further normalize. And I think the broker community does a very good job at explaining it overall. It's just a wholesale change to how the market structured that I don't think we were ever going to see people's mindsets adapt to that overnight.
14 I do quite a lot of banging on at a lot of the talks I do about the new normal.
Actually, you are climatized to the new normal. You find a deal that works for you in today's pricing and hope and trust that actually if the market improves, it will work for you even better in the future.
Yeah. Um there's something to be said for an acclimatization, but there was a lot of myths at the time about we would see the peak like a sharp mountain top, like a triangle, rather than the reality is more like table mountain. Yeah.
You live at the you live in the peak for a while and you get used to it and you slowly come back down.
Um borrowers have also changed sort of some of their buying habits to chase yield. We've seen a lot more newer borrowers in the last two years particularly enter the bridging space do some short-term borrowing to maximize the value in an asset buying below market value. We've seen people divert into social housing and again lenders are trying to keep up right they're actually they're really trying to help there's money in the market to be borrowed and debt remains a good option for borrowers to consider. We hear so much about angel investment, find an investor, but debt has a home still in this space, right?
Yeah. Look, the market is full of liquidity. And the I'm sort of the memory of the financial crisis where liquidity was the problem. And this is very different because there is demand, there is liquidity.
it just there's just sticking points in terms of where people expect it to be or need it to be in their mind to transact.
So that has put the brakes on to an extent but if I look back over the last few years and actually it's mad to think that we are sort of three years into this now.
It's you know it feels just like yesterday doesn't it?
If you look back that first year 23 was really tough, wasn't it? And we had another little peak in the June where swap rates went through the roof. Um, and then we've seen it eb and flow from there and we've seen a few base rate cuts which helps a little bit as well.
And I think the market is in a decent place now. I think you know we're interest rates are what they are.
They're going to go down a bit I'm sure but it's not bad. Do you know I see loads of talk there's still lots of talk online particularly on social media platforms Instagram LinkedIn and other places where people will talk down standard blet's dead and actually we haven't seen that as a brokerage right we're lucky to have quite a decent market share we transact a large volume of deals a month a year and we have a you know a particularly premium presence in the buy to let space but we're seeing purchases we're seeing purchases across the board still I think probably what that more refers to is your like, you know, middle class couple that have a fairly decent income, some savings knocking about and say, I'm going to put that into a single buy to let property.
I think that part of the market is probably all but dead. Yeah.
Um I think the accidental landlord where someone's just renting out the house that they live in and buying another one that's a bit dead as well because of the tax treatments etc. So the I don't think Buy to LET is dead at all, but I think it's what it looks like in its new capacity and one of my big concerns is what availability of sort of family home rental stock there will be because there's a huge raft of people that are going into HMO, you know, doing the more creative side that chases a higher yield, but actually we do still need buy to let landlords and there car purchases happening for sure but it's hard to make the numbers stack isn't it on a single family buy to let purchase these days with all the tax treatment and the various regulation that you have to go through it's you know it is tough and I think that side is really suffering but the more professional end I think there's a huge opportunity there and that that rise of the professional landlord again something we talk about a lot but as a firm we shout about in the market that has benefits for lending as well, right?
Lenders want to work with professional landlords. Some do and some don't. I mean, what our end of the market Yes. So, what we have exposure to that is exactly where they want to be.
Yeah.
If you go into the more like mainstream bank end of the market, a lot of them won't lend to portfolio landlords or they don't lend where it's I mean most do limited company now because it's hard to avoid and that's where the market's moved to but it wasn't that long ago that some didn't have a limited company product or they don't do HMOs and the more quirky type what they class as quirky that's probably still quite mainstream for us isn't it but the there's the there's a definite push through to the specialist space which I think again creates opportunity for us and for other businesses in the space to help people to try and resort of ren their journey and you know pick a new direction because I think just growing a single portfolio is a big challenge and I think we'll see landlords selling off that stock because it's just too hard to make money in it.
Yeah. Yeah.
So, I think it's a change, but I don't think landlords are just going to hang up their boots and say, "Well, I gave it a good go. Now, I'm going to go and do something else." You know, these this is their jobs. It's their occupations. And I think credit where credit's due, they're pretty good at weathering the storm.
Yeah. An incredibly robust market, I would say, and robust people in the space, which is a good thing. Um when we talk about debt, if we digress ever so slightly, you know, we as a firm, we're not necessarily sourcing people with angel investors or equity partners. We're looking at traditional debt, specialist debt, whether it's private banks, challenger banks, high street or specialist lenders, everything in between.
What are some of the mistakes that we're seeing right now that you think of note for people going into debt maybe for the first time or maybe just their expectations are wrong? What are some of the things that people may be That's a good question.
I mean, if I had to if I had to sort of summarize it, I think there's a lot of noise and smoke and mirror out there where the market's flooded. There's a lot of lenders and I've talked about this recently because there there's a lot of money. There's a lot of liquidity out there, a lot of new entrance to the market and there's a lot of headline rates and shiny products that have quite good marketing campaigns.
But the devil's in the detail with these things, isn't it? And I think that it's easy for people to get a little bit blinded by what they're seeing out there before having like a proper quality of advice and talking to people that know the market and understand the market and we as a business we make sure that people are aware of what is out there.
So if we think there's a product which suits them but there is a cheaper product we have that conversation and I think it's important to have that level of transparency and you know we are we're completely impartial as a brokerage and it's important that people know that you know what we're suggesting ticks a number of boxes. might not be price only or it might be you know it might be the best price out there and coincidentally that might be the best product out there but I think it's very easy for people to get caught in the hype because everyone talks a good game um especially in the bridging space actually I think buy to let's slightly different particularly crowded it's a particularly saturated lending market though isn't it bridging yeah and if you get that wrong especially as a first time investor the consequences of getting that wrong are pretty severe compared with a buy to let loan.
If you take on the wrong bridging product and you've got really high cost of borrowing, but not just the cost of borrowing, but actually you don't know how that lender is going to act and behave in a scenario where you might hit a snag because look, it's the first time that you've done it.
And even if it's not, this these things happen, right? We see it happen time and time again, even for the most seasoned property people. Yeah. that a good plan sometimes doesn't come to fruition for one reason or another, whether it be sort of macro or something that's happened uniquely to their project. So, it's so important to make sure that the people that you're working with, it's not all just talk and headline rates because there's just so much more to it than that, isn't there?
I think that is the big mistake is people looking for it's a rate chase rather than a is it deliverable? Is it in my time frame? Does it still work from my yield perspective? Yeah.
And this project is riskier or it's tighter on time or it's not do I have someone that's going to look after me and partner with me throughout the life cycle of my you want a 360 loan. Yeah. Not a and bridging is a really good example of it's so easy for bridging lenders to come to market.
You meet somebody at the hotel pool high net worth from abroad with 10 million pounds to deploy and you come back a bridging lender. Yeah. Start throwing it around. Most bridging lenders can get money out the door quickly. That isn't the key selling point of bridging anymore.
No, it's how are they funded? How much control do they have? How are they going to look after you? And you're right, if something goes wrong, will you get to the end of term and you need a little bit more time? What's their policy? Do you check up front? Is it a humongous extension fee? Is it immediate repossession? Is it default?
Or will they work with you to support to pay a bit that's due but then help you get out into the right sort of product at the exit? So I think everybody taking a breath and taking sensible debt is more important than just the cheapest debt, right?
Yeah. Look, I think trust is everything and it's about the people that you deal with.
But when you're first getting into the sector, that's obviously hard because unless it's a recommendation, you are it's the first time you're dealing with anybody. So I think it's really important to check credentials and to look at how long these people have been going.
And I think there are other things like you can look at feedback and stuff like that which is mixed isn't it because quite often you get you know disgruntled people that will have an issue with a lender because they haven't performed.
So you have to be a little bit careful of that. But I think longevity in the market is a really good one. And that's not to say that newer entrance shouldn't be seen a go because actually you get some really good entrance back by really good people. But it I think having like proper advice and having somebody that you can rely on is key. Otherwise, you know, you're going into the unknown a bit, aren't you?
Very much so. You we did some content not long ago about what's the focus when delivering a product. And actually, to quote you, one of the lines I like within that was the best deal is the one that delivers.
And yeah, absolutely. That's the main thing is what's actually going to hit your bank, support you in achieving the project and whatever the outcome you're looking for is and then successfully move on to the next and the next. And it's that long-term game.
Absolutely. And sometimes when I'm talking to people and they've found something that's really cheap.
I would never go to say, "Oh, that won't deliver." Because, you know, sometimes it does work and that's great, but it's if somebody could say to you, right, if you take this product, you've got like a 90% chance of delivery. If you take that one, you've got a 25% chance of delivery. Yeah.
If you've got three or four weeks to turn it around, it's a really big risk taking the 25%. and you might be in that 25% and then you could be quite you have a lot of conviction and you say well look actually I got it done and it was cheaper and that's great. So it's not to say that it won't deliver, but it's higher risk. And I think that's always what we're trying to talk to people about that look, you have to make that decision informed, but if you want to go down that route, you are taking a bigger risk. And I think sometimes people don't want to hear that because ultimately every penny they save and the cost of borrowing drops straight to bottom line.
And I get that, you know, they're commercial people and it's the difference between whether you make a 25% or a 30% return. It, you know, it can be everything, but ultimately you have to be very careful because sometimes it can end up being more costly in the long run. Both delays, penalties, overruns, all sorts of things.
Yeah, I agree. I um I mean the market's full of bravery and people taking risks, but I heard a great saying the other day that I liked which was fortune favours the brave but not the stupid. Yeah. So um taking that breath and considering your position is really important.
If we look ahead, if we move forward to what's coming, what's next? If what are your thoughts on I guess fronts here? What's going to happen to rates in the next sort of 12 months? Do we think the rate market is still coming down? Is it's going to come down quickly, slowly? I know my thoughts are trying to assume the same. What do you think?
Look, I we get asked this all the time and I one thing I say is that what I say today, even by time this is released, I could give a different answer. So I caveat it to it's really fluid because at the moment inflation has been stubborn and we didn't expect it to be stubborn and when we saw some positive moves in inflation and we had base rate cuts it was followed quickly by a spike.
So it's really hard to say because the market is reacting to what's happening.
We have a budget coming up a late budget which is not very welcome for the market because I think people just want to get on with it. They want to know and I think people are nervous about the budget especially as a lot of reform around stamp duty and ongoing property taxes capital gains tax on principal residents. So all those things can have a massive impact and obviously that feeds into what interest rate decisions are made because it's based on the macro. So I think as looking at it purely from today it feels like we're in quite a steady place. So swap rates have been bouncing around but fairly stable for a little bit.
For a little bit. Yeah. And we there was an anticipation that we might have another base rate cut soon. Probably that's not going to be the case. But I wouldn't say it's unrealistic that we would see at least another one this year. Just depends on what other data comes out to support that change. I definitely don't think it's coming down fast.
And one thing that I say to people all the time, well, I might just wait and see because I think rates might come down a bit by then, and we're talking say between now and the end of the year A lot of what is expected to happen is already baked into the cost of borrowing as you know.
I wanted to smash that myth. Yeah. The base rate is not a key indicator.
And this is the for the benefit of the listeners of course because you know, you understand it. But the There's a common misconception in the market that base rate reduces cost of borrowing goes down straight away.
And obviously if you have a variable rate and you've got that product already, then your cost of borrowing does go down because it's usually linked to Bank of England base rate. However, if you're taking out new borrowing on a fixed rate, which is what the majority of the market does at the moment, it is very much a case of, as you know, what the market has predicted for the months ahead. So your swap rates are already seeing that interest rates are going to come down a little bit.
And if they think they're going to go back up, then the swap rates are going to go back up. If we see some news that is far from positive, then you see that bounce up quite substantially. Budget, a bad budget. So, actually one of the biggest pieces of advice that I can give to anybody is don't hold off
your plans for short-term base cards. I mean, if we're talking you've got a portfolio and it's you you're not really bothered to do much, you could change it, you could not, that's slightly different.
But if you're looking at making acquisitions and you want to draw money out and you've got something on a high variable rate, the cost between now and the point that you think it's going to be much cheaper will probably entirely outweigh if not nearly outweigh the benefit of waiting. So you wait to see if interest rates come down and they come down 25 basis points but then you've been on a higher variable rate. It makes no sense.
And we've seen a lot of people over the years, the last three years put their plans on hold and then end up we've transacted pretty much in the same place that we would have done when we first started talking to them. And sometimes the positions got worse, sometimes it's sort of there or thereabouts, sometimes it's slightly better, but on average it's there or thereabouts.
So I think it's important to say that we have that helicopter view of the market from talking to lots of different people. And it's hard to convince people because it sounds a little bit like we we just want them to go ahead for our interest, but actually our interest is our customers getting the best possible outcome that they can because that's what makes a customer a one-time transaction to a lifelong customer.
And I think that it's important that people realize that most of the market, most brokers in the market would share that view as well. Brokerages aren't successful because they deal with a customer in one transaction. They're successful because they look after customers for a long time and sometimes generations.
Yeah, completely. And also and none of us have a crystal ball. And actually the big the big sort of secret is that um we have a fear of the unknown as well.
So dealing with what's in front of you if it looks fair and reasonable. Yeah. Is sometimes the better option. Take what you can see.
For sure.
I think so too. Yeah. What one thing that I mean people maybe do or don't know if they follow us online is that we're a little bit different from a lot of brokerages in that you and I whilst running the business write business as well we deal with borrowers we deal with transactions ourself we still have one foot to the flame you particularly have done that throughout your career and typically we're dealing with larger loans and we see a lot of high-profile borrowers and people looking to consolidate larger portfolios or begin a larger transaction. Yeah.
How is that different? How is that different for a borrower and why should they be maybe engaging with a broker in a slightly different way up front?
Um, I suppose it's horses for courses, isn't it? If you're mortgaging your house and it's a rarely sort of a straightforward transaction and it's price driven and it's, you know, your income's pretty standard, there are a ton of really fantastic brokers out there.
And then when it comes to the specialist end of the market, it's all about experience, isn't it? and what people have seen and transacted over the years. And we have a really strong team of people, don't we, that know the market inside and out. And then when it comes to the more complex in nature and the higher value transactions, I think it's really important for people to be able to talk to someone that understands it really well. And I think we can offer that whole chain of different experience levels. And you we've got people that have been doing it for 15, in our business who are absolutely fantastic.
And you've got people that cover different parts of the market as a specialism, whereas we're not generalists. you know we do have those specialisms in the exact product that people are looking for whereas I think a lot of brokerage firms they will have some connections in the specialist space for sure but it's like anything isn't it if you if you want something which is really specific you're always going to get a better outcome by going to someone who covers that part of the market rather than the whole market I think so too and I think one of The big bits of advice for me for borrowers with that is once you've found a firm that you think has the competency and the experience to deliver for you is don't share details of the transaction. Share the story.
Here's what I've done. Here's what I'm looking to do. Here's what's on the table right now. Here's my background.
And actually, because finding that, you know, you'd be surprised, I think, within the borrowing space for landlords and investors and sort of up and comingling property professionals to learn how much lenders listen to that in our world.
Actually, specialist lenders back the person as much as they do the asset. And sharing that up front with a good broker who has the ability to put that story in front of a decision maker and to position you in the best light can lead to bespoke pricing sometimes if the loan's large enough.
An exception to criteria, a slightly different process, and and ultimately strong results.
And it's all about working in partnership. And that's not just borrower to broker, broker to lender.
It's everybody involved in the ecosystem.
Yeah, absolutely. And I think that the it's when you present something to a lender, I think that the credibility that comes with the understanding rather than just sort of post-boxing the information. A lot of a lot of borrowers will sort of think, well, why do they need my assets and liabilities? you know, this is a limited company purchase and it's being able to educate people to make sure that you extract the information that you need to get them the best deal.
And I think we do meet a lot of resistance from people about supplying certain information up front and it's about making sure that they understand why and that it's not just, you know, we haven't got a checklist and we're just ticking boxes to say we've got this document, that document. You ask for what you need and you're able to give a rationale as to why you need it.
And I think that gives you a higher chance of success. And sometimes I say this over and over again, having difficult conversations with clients is not something that I personally shy away from because actually that leads to a much more honest, well-rounded relationship than if you're just a yes person that tells them what they want to hear.
I totally agree. leads me into sort of my final question and the final sort of sentiment I want to leave out to listeners and anyone watching and listening in. What advice do you have?
Let's just say we're at the newer end of the market. We've got people who maybe are landlords already looking to now start developing or taking debt that they've not taken before. New debt into the market. What advice do we have for borrowers entering into this market now?
What should they be looking for? What should they be considering when they're looking at debt? How should they be approaching that?
Naturally, I'm quite risk adverse and I think I take quite a conservative approach. And often when I speak to people, they've had it drummed into them to really like push the leverage and push as much as they can and do as much as they can.
I personally believe that whilst there might be a top end of where you can get to in terms of borrowing capacity with the deposit that you've got available, the cash around you you've got for the project, you can sort of say this is the absolute maximum. If you hit a bump in the road, then you're in trouble.
So, I would always say definitely have ambition and you know, we want to see people that are ambitious and want to grow, but for the first one or two, just make sure you leave a bit around you. We see so many things go wrong because people have put every penny they've got in and they've borrowed every penny they can borrow.
And if things go against them, because it's easy to have roasted tin spectacles, isn't it? And say, "Look, this is what I think I can achieve with this." But it doesn't always work out exactly to plan. Sometimes your return might be slightly less or you might hit some delays.
And if you haven't got the capital behind you in order to weather that storm, it can be quite a quick and not very successful journey into property. So I I think that's something that we see and it's really important that you don't get pushed into biting off more than you can chew.
Yeah. Proper due diligence, sensible decision- making. And if I can add to that, I think my big piece of advice for any borrowers and anybody looking to get into the market that might be listening is talk to an expert in the field. I think it's a specialist world, the finance world for investment for professional landlords. Speak to a specialist in it.
Yeah, I have a natural bias for that obviously, but there are a lot of really good firms in our space. We have some fantastic competitors. We are a market leader in ourselves, but if you're not talking to a brokerage or somebody that can advise you in who's dealing with it day in day out, then you're not necessarily going to get the most accurate advice.
Yeah, absolutely.
Yeah. So, hopefully that has been helpful. It's been really good to talk about the market. Um, as always, back to work for us. Yeah.
Now, thank you to everybody who's tuned in or listened wherever you found us.
Uh, and if you have any questions or want to engage with area finance and speak to Lucy or myself, you can find us on our socials, which I'll have all links below.
Um, or you can reach out to the team via the website or by calling the office direct. Hopefully hear from you soon.
Welcome back to the Aria Finance Specialist Scoop podcast.
I'm here joined this time with Colin Horton from Project and Co. surveyors, a leading surveying brand in the business and valuation is such a hot topic at the moment for borrowers, lenders and brokers alike. Really good to get your insight.
Thanks for coming, Colin.
Colin, for those that don't know you, maybe don't know your business or don't know sort of your standing in the market, tell us about you. How have you got into this? Why valuation?
No worries,
Okay, I'll try and condense it or bullet point it as much as I can. I fell into valuation, fell into asset management and grew my career in that space, predominantly specialising in lease-line enfranchisement, which is very niche and very boring. Government got involved and that market just went completely quiet. So I had to evolve and there was an opportunity in lending that I just thought, you know what?
it could be done better. I decided, know what, I'm going to give this a go. Obviously I don't look like you're typical surveyor. I don't talk like one, that's for sure. And you know, I'm not from, you know, London, I'm from Essex and there was, there's a little gap and we basically just went guns blazing the marketing, absolutely smashed LinkedIn and just delivered really good service really quickly, really efficiently and just focused on communication.
Fast forward to now we won the Bridging and Commercial Best Surveyor which was absolutely huge for us in our first year of doing this. I've gotten the Bridging and Commercial Power List, which is also amazing. And they gave me a great photo, which was even better. And we're just really trying, mate, to really kind of make headway in what is a really difficult sector to infiltrate as in a sector where there is so much risk.
Yeah, and also so established people can be really stuck in their ways. I see that from a finance perspective too. How quick was the learning curve then in a sort of first full year of trading? How, if you look back from month one to month twelve how different are you guys?
So the actual business itself has been going for six years and we hadn't done valuation. We were just focusing on building pathology and everything that comes with that. I thought initially we actually originally jumped into it probably about two years ago. And I thought I can do secure lending. It's just Redbook valuations, easy peasy. Got enough kind of capital in the company to invest in some good people. And I'm very blessed, I'm very good at selling myself and...
We have to get people from your big kind of corporates. That's what I told myself. And we cherry picked some really good people who I trust wholeheartedly. And that was it. We just went to town, mate. And we just started like meeting people. Brokers were a big thing for us because brokers, my fiance is a broker. You guys go through a hell of a lot and it's difficult. you know, I think brokers have cried out for years for valuers who are there for them as much as the lenders, you know, it's not.
You guys ultimately choose us on the panels, you know.
Let me bring it back. One thing that was really interesting is you're talking about from the outside, you've looked at valuers maybe not being able to be held to account on their figures and justifying it. How do you, how are you doing that differently? What's the, what's the tone of Project and co?
So my tagline, which I have, think I've tagged now for nearly two years consistently is every single day is surveying with personality. And that's been a big thing for me. I think having the ability to communicate with brokers and lenders and you know, a deal comes through. What a lot of time we do with our broker clients or say clients and referrers is they'll come to us initially and say, Col, I've got this deal. Can you have a look at it? And I'll have a look at it. And if I think it's crap, I'll tell them, I was like, don't do it. This deal is rubbish. And I want to help make a difference in the set. So I want lenders to lend well.
And I want you guy brokers to earn a lot of money. And I think we are such an important cog in our ecosystem that I think us as value is forget that. And that's why I was so passionate about just trying to change it.
Always looked at the whole specialist lending proposition is a puzzle. There's a jigsaw and you don't solve it with one element and one arm. And that includes I'm reticent use to use the power term phrase cause I don't love it, but it's not just about having good tax advisor and good legal team behind you, but
You're lending, valuing, broking services have to align, have to fall into place correctly to make a deal work. And it's not just about getting the numbers, right. It's about the pace, about the delivery and the execution of that. And, you know, that does take beyond all else. What it takes is good communication because I do agree with you that the down valuation term is funny. I've not thought of it. You're right. A valuation is a valuation The downfall is in the eyes of the beholder. Correct.
With good communication early and justification of why does a borrower think it's worth X? Can they justify it? Have they got some comparables? Can they value or immediately go, no, I can tell that's wrong. Well, that sounds okay. Let me go and look at it properly with my expertise. Can brokers catch that early? Can lenders say, no, that's a nonsense. And can we make that journey more painless? And it does take everybody. It's not just one person, right?
So you have to work with a lot of different people in the system. How do you manage the balance between managing borrower broker lender expectations.
So, you know, as percentage, my day is mainly spent talking to brokers wanting everything urgent. Urgent has really lost its power as a word, you know, and I think valuers in nature aren't combative, you know, in their personality types. They're generally, they're not trying to stereotype, but valuers aren't necessarily the most outgoing people as a profession.
So you know, having the confidence to be able to stand by your valuation and to tell a broker ain't going to be like that or to tell a lender it's, you know, it's not a great deal. Don't do it. Or actually I'm actually really struggling on the comps, but I actually generally do think this is worth what they're in a pan. And, you know, it is, it's, it's really difficult. I mean, applicants, luckily we don't have too much interaction with them. Luckily, you know, and when, when we do have interaction with them, you know, it's on site doing the inspection.
But a lot of time it'd be agents and stuff there. you know, but lenders, you know, from my experience with lenders and underwriting teams, you know, the BDMs are great, but it's the underwriters that have all the power. You know, and you have to get on side with the underwriters. Underwriters will make a call pretty quick based on the quality of your reports and the style. And every lender has a different risk profile. So there are certain lenders that actually really want to lend money, you know, and they're a little bit more risky. I don't say risky, just a bit more, you know, commercially minded if want to.
It is funny how quickly, you know, firms get a reputation for, for misevaluations, right? Even if they're not down, that they're misevaluations, you get some of your high street types and I won't name names, but people attached to more vanilla lending will go out and come back with no values on great performing buy-to-lets or HMOs or assets that maybe have a slight flying freehold or something unusual. And they go, no, not suitable for mortgage lending. Whereas a huge part of the market might be okay with that.
You just have to pay for the right valuation, the right red book, proper report, I've driven past and I don't love it.
These guys, mate, they're doing six, seven valuations a day. It's smuggling all the term stuff. Bridging, is bloody off. They're doing seven a day, like on the high room. And they don't care. They're emotionless. There's no. The reason I've got so passionate about it is because I was set in a property once, my own personal residence that I lived in. It was quite an obscure property in terms of that it was a converted post office. And it was like three-floor flat. And there was no real comps for it apart from the flat next door it sold.
Hang on exactly the same. Anyway, value came out and they knocked it by like 50 grand and it sold it on the first day to the first person at the right price. And I had to like, I just cannot understand that you're, this is 50 grand, know, to someone to save 50,000 pounds. Yeah. You're talking a couple of years or whatever to do that. Yeah. Like they don't, I think a lot of them just take their emotionless and I think there is more to this game than just that, you know, and maybe I'll shoot myself in the foot when I say stuff like that, but you know, for me, it's...
What are people's misconceptions about the role a valuer plays? What do people assume you do that you don't where, where they maybe come at you for, if you can impact things.
I think they just assume that like, think they generally think that we actively either, depends how they view us naturally, but I think we're to down value stuff and just so the bank can lend less money or better a better term or whatever, or other brokers out there just see us as people that they can manipulate and try and get decent figures out of. And you know, over the last year or so, I've become so much more aware of that. I'll help and give advice where I can, but I just don't take the mic. There are a lot that will call you outside of hours, call you at 7, 8, 9 p.m. at night. I'm fine for that. But don't take the mic. Don't ever ask me to put my career and my firm on the line.
Yeah, yeah.
And I guess that's the, in terms of, you know, for people watching, what, can you do to give yourself a best chance of good valuations? Guess it's being selective and honest with the pressure you're applying then if it's urgent, say it's urgent. If it's not, let's get it done. Right. Not rushed. I presume that helps you anyway.
Correct. For me, the biggest thing I hate is when we get instruction on the matter. And I've gone through the valuation before with said broker or whatever. I said, look, based on what you've told me, You know, initially, I think you've got a good chance of this stacking up. I can't guarantee it, but I think you've got a good chance of it stacking up. You end up going to the property and it ain't what they've told you it is. You know, you've got like 22 people in one bedroom, you know, and I'm just like.
And again, ethically, how I grew up, it's a matter close to my heart, and I was like, I don't like people taking the mick out of the system, you know? And it's just having that transparency with me at the start. You know, and how realistic is this? Do you honestly think it is actually worth it?
That impartiality, how, how do you maintain that? Just staying honest to the numbers, just finding a way of justifying it.
Yeah, you have to remember that everything you do, it can get ordered, you know, ultimately. know, if everything, anything got, God forbid was ever to go wrong. Luckily we've never had anything go wrong, but if it was, you know, there's going be paper trials, there's going to be everything. So you have to, you have to make sure that you're, you're treating both sides fairly.
You know, that is the, obviously the applicant and and the broker or three sides the applicant, the broker and the lender, you know, all I can say to, to people listening is with your value of treatment, respect, you know, and if you do get a down valuation there probably is good reason for it, but obviously speak to other brokers, have communication, see where you're having success. There are some really good firms, not just my firms, there are some really good firms out there, valuation ones. There's some ones I don't necessarily like as well, but it's just having that communication, those relationships. And I always recommend having relationships with maybe three or 4 different firms, just that by all means message me and I'll tell you who. And it just gives you the best chance of getting the best deal for your client.
Communication is such a big one. Actually, on previous episodes, one thing we've talked about with others is the benefits of communicating well with your lender when you're in the debt. If something's going wrong, if you're growing your portfolio, if you're thinking about changing stuff, the same with your company structures, liaising and communicating with good tax advisor, your accountant, making sure you're on the right track. And it's no different, right? I think sometimes the valuation process is seen as a necessary evil. I want this money and to do this, I have to part with this cash and they have to give me a number.
And hate it. And actually, if we communicate honestly and transparently, then we're more likely to get a fair outcome that we've got eyes on early,
100 % authentic and transparency in this game is absolutely paramount to getting the results that you want. And for us as, like, I'd love to think that as a broker, will you speak to me on the deal? You can honestly tell me what we're actually looking at here. So when I do go there, I've got no shocks and no surprises.
Cause the last thing I want to be doing is delivering you bad news and it hasn't stacked up on what, you know, I think it is. you know, I'm fortunate at the moment, nine out of 10 times, it isn't the number that the applicants put in. I've got quite used to delivering that bad news, but it's the way you handle it and giving them a heads up. There's been times where I've started valuations up, we've actually taken the fee, I've actually inspected, and I can quickly see like that, that it's not going to start and I've stopped. And I've just called up the broker and said, look, I'll refund you, because this isn't going to work.
And I think that goes a long way, it doesn't necessarily help the bank balance for us, but, you know, ethically for me, that's how it should be done.
Yeah. And it matters to the borrower, right? Cause ultimately the end of all of this, there is somebody trying to buy or remortgage property who's spending money on the professional services around it. And you want to make sure it's the right process, right? Yeah. That's a good thing.
Taking a step away from some of those challenges. What are some things that if I was a borrower tomorrow, needing to re mortgage, I'm confident I've got a good asset. What can I do to my property to make it attractive in the eyes of a valuer or in terms of that'd be good for resale that would go quickly? What are some of the bits you look for that stand out as?
So for me personally, the kitchen is always the biggest, the biggest room for me. It's always the biggest draw. It's the most expensive room in the house. Obviously if you haven't done your kitchen, you know, it's just obviously very obvious things that can tidy up, cover any imperfections. I mean, I shouldn't say that.
before you go on with that, how often is that not the case? I mean, tidying up feels like a really basic bit for me, but I've had to tell clients before, make sure it's clean.
It seems obvious, doesn't it? I'm not expecting like, know, sparkling, but just make it smell nice. Smells a big thing.
saying that because some people are going, look past that, look at the numbers, but that's what a buyer would think. Right. That's the human instinct of you walking in. That's what a potential buyer would think. Correct. The reason a lender gets a valuation is in case they have to take the property on and if the case they have to sell it. Exactly. That matters.
So that gardening, like just keep your front, you know, just keep it externally. As soon as the valuer walks in, they're to be looking at it and they're going to say, this is maintained or not. So it's all about like the psychology of how much someone values something. And it is, it's a very good point is how much, you know, if you're going to buy it, what would you be looking for? What would put you off? And that is the best way to do it. You know, there's no kind of rocket science per se. We often get asked about valuation packs and stuff like that. I like them personally.
It's nice to understand where the applicants come from in terms of their valuation. Yep. Sometimes if I'm in the mind of the applicant, sometimes it helps me with this. Sometimes it's a little tricky kind of, and don't make the mistake of just pulling right move comps that are on the market.
What people giving to you there., that's a good thing because people not some borrowers might be new to this or might not understand. You're talking about somebody presenting you with a pack of their rationale as to why they think it's worth this before you look and make your views. So what in there is useful?
So for me, obviously I know full well that nine out of 10 lay people will just go on Rightmove up for sale, high to low, pick the ones that cherry pick that suit their case. I don't, unfortunately for them as a valuer and for RICs we don't really care about what's on the market for sale. We'll use it as maybe a secondary or kind of third resource if we're not sure on a value.
But we look for sole comparables, ideally within the last 12 months, ideally within kind of a kilometer. It's again, the way I twitch it back to everyone is if, I value it as if I was going to buy the property and that's how applicants should look at it. Try and take the emotion out of it and say, look, if they were going to buy this property themselves, what would they be looking for? And that's a really simple way of doing it. But you'd be amazed that people don't do that.
They always just send me or sale on Rightmove high to low. the time, which you're discarding basically immediately. Correct. Yeah. Okay. That makes sense. Yeah. What, what sort of stuff have you seen recently that's particularly interesting? I mean, you must've been in some wild properties. What have you seen in the market at the minute that people are transacting on that is interesting, that is different. That's caught your eye.
I'm really enjoying the care sector at the moment. Only this morning I was working on a valuation of nine flats that are being converted into basically serviced accommodation for children with disabilities. And the yields are unreal. And it's a good cause, you're helping kids that are suffering. But I'll try and keep the numbers as rough as I can, but.
The contract over these nine flats is worth about £200k a year. And the actual rental amount, if you were to rent them was somewhere in the region of about £80k . There's a huge swing. I think, care is probably going to be the new HMO side of things.
There's a middle ground already, right? Because from our side, we probably see it maybe more than you do. Maybe you're less aware of those contracts in, the social housing sector. So they look like HMOs from the outside, but it's the contract and the strength of the lease. that's sort of that hybrid in between care and social sort of responsibility, but also private rental sector. It's an investment.
I've got one myself.
It's unreal mate and it's solid. A lot of others don't like those five-year contract, which surprises me because it's really secure. generally in the contract is to put back as was when they took the contract.
Yeah, secure tendencies as well. They're great. And actually, if you do get that, it's an interesting one for me as a broker placing these deals with lenders and getting buy in, you know, the fix and repair clauses and making sure that the, properties handed back to you in the same state you hand it to the provider is vital and gives you a level of protection that you didn't have before.
Making sure a lender can get vacant possession. They have vacant possession rights is really important. And then actually qualifying who's going into the property to make sure a lender has the appetite, but they are great. It's a great return. It's doing some good, you know, there's some panels recently housing for good. It's a really nice tag and so it's good, it's a good model and they're valued the same way, right? You're still just a property from a valuation perspective. It's an asset that someone can hold and can reinvest, can sell, can do whatever they want with, right?
100%. And what I would say is, especially the example I had today, is make sure when you are going to put in your application that you have got the lease kind of signed already if you are going into that, because a lot of lenders that we work with don't really accept kind of hope value. So the hope that it's going to get signed, you know, so what I'm good telling me that you've got 200 grand rent coming in, but unless it's signed, I can't value on that premise. So that's just one thing. Do make sure that you, if you've ever put in applications in that you can cross the T's and cross the I, that makes no sense. the I's and cross the T's. So yeah.
And that leads onto something that's a really hot topic at the minute because valuing yield based valuing in general, there's loads of education out there in the market at the moment. Lots of property mentors talking to willing borrowers, keen borrowers about HMOs and moving into the HMO game. And it's not just buying ready-made HMOs because a good HMO isn't on the market. People are holding them. It's converting single dwellings into HMOs.
They're often taking short-term finance to do that on the promise of a commercial valuation at the end, being able to pull all their money out. Now that model is absolutely possible, which we've covered in previous episodes and generally in the market, but you're not always guaranteed a commercial valuation on a HMO.
We've talked about it with lenders before. What, from your perspective, would give you a stronger case for recommending the commercial valuation on a HMO property?
What are the sort of criteria that you?
Yeah, so I mean, obviously the amount of rooms obviously is paramount. I think the lowest we've done one on is five, we have done them on five and sometimes that is the right way of doing it, know, it's just, you know, but generally we're looking six, seven or above. I can never say it properly, but sue generis how ever you say it?
You know, but ultimately the things that we look at for whether or not it should be applied as a yield is we look at the quality of the, you know, the conversion, how much material change has actually gone on to the property. Because a lot of time if it's had six ensuites put in, it's quite a substantial amount of change. So take it back to a house. Bricks and mortar doesn't really apply to it. It is going to be an investment method. The quality of the operator is now getting factored in a lot more. So we are often asking our lender clients, what's the history of this applicant?
Because obviously it is very hot topic, everyone's kind of jumping on it, but if you haven't managed the HMO before, how do know you're going to be any good at it? And obviously the proximity to strong employment bases, i.e. hospitals, town centres, big kind of corporate blue chip client, that kind of stuff, doing really well. Actually where I'm from in South England Sea is a prime HMO area. It's really strong HMOs.
And obviously don't expect generally really strong yield if you're a HMO investor and you do not take care of the rooms and the clients, like that will get factored in for us. And we are seeing that a lot, you know, and a lot of time they're over-rented and they are putting people in squalor. So I sound like some, you know, evangelical valuer here, but you know, it doesn't help.
If you're putting people in decent, good living conditions, chances of you getting a better yield are going be stronger because the risk of obsolescence is a lot lower, you know, and what I mean by that for anyone who doesn't understand is, you know, with HMOs, there's a lot of people coming in and out. So naturally there's gonna be wear and tear and damage and stuff. And I think what a lot of people forget about HMOs is it's all well and good to get that really lovely, sexy refinance, which we all want. But, you know, because so many people come in and out, probably every seven to ten years, you have to redo it all again in terms of decor, new bathrooms and kitchens, etc. And it's not cheap.
You know, so just I know HMOs is really exciting, but just make sure you do research and obviously speak to great brokers like yourself and just make sure you know what you're doing, you know, because you are very much and you couldn't be... Of all the property investment opportunities, HMOs are the most dependent on the valuer on that exit. It's all about the exit.
For sure, if you've done the conversion works yourself, you're absolutely right, because everyone's hindering on the massive uplift.
They don't sell, mate. There's no, if, that is the worry for me, if I'm honest with you. I look at the market and I think, okay, it's been valued at this on an investment method. So, value is a business fundamentally, but my God, they never trade anywhere near what they're getting valued up for. And we are not the only one in the sets that's raised this. know a lot more lenders are pulling back a little bit on investment. But lenders are doing it, understand it and get it.
Cause it's interesting. Cause look, that's important to hear because if, even if your view is naturally overly negative, let's just say, let's say you're on the more pessimistic side, you're a valuer. So that matters. And the market is full of people with lots of confidence and being brave and finding ways to go into a deal going, I'm going to get an investment valve. I'm to get a commercial valve, but they need to understand the risks, right?
That it can be a six bed HMO, which is not guaranteed seven bed is different because if you've got a sue generis planning, it's the it's different anyway, but If you're a six bed HMO, it could go either way. And it sort of is on the valuer and then the lender's interpretation of the value as comments as to whether they grant you that or you're back to bricks and mortar.
Our instruction always come through bricks and mortar and or investment. And that's how it comes through. Now we do do investment method, like we do it all the time. Based on vendors, what they want us to do and if we can find the evidence we will. But it is arguably the hardest part of valuation because there's no evidence, must be this everywhere right it's still really you must see a lot of this.
Yeah, mate, I reckon at the moment, we are maybe doing one - two a day HMOs. We are doing investment, but you know, is just don't, when you're doing your calculations before you speak to yourself, like just make sure you kind of speed a bit more conservative. If you get a lower yield, great. But just be careful with it, you know, don't, because I've seen people go, you know, they spend all of their money hoping to get like a 8% yield or I don't know what, you know.
Yeah, it doesn't surprise me what they're expecting, but say an 8% yield, it might come out at 9 or 10. So the tip is always to speak to your broker and just find out what lenders they're having success with that are doing, know, it probably won't be us, but what lenders are doing, who are having success with the valuers that are that they're doing good yields. And he's got to kind of play the game and work it backwards. Because a lot of lenders, there are a lot of valuers that will just absolutely tank it.
Do you think, does it make a difference for you and your valuing if it's within Article 4 or outside? It does it indeed.
Indifferent. mean, more and more, mean, non article 4 is becoming rare. Yeah. Yeah. Now, the one we've done today was just outside of alien and it's got article 4 coming in December. And it does make a difference. Of course it does because it means ultimately it's going to be less HMOs, which is, know, for the HMO owners, a better thing. Of course it is. And, and given the way the UK economy is at the moment, I think HMOs are a really good investment despite my pessimism. My pessimism is purely on the exit. Yeah.
And you know, just, I just don't want people just taking out all of their money all the time, you know, and then leaving themselves.
Good model and within article 4 more chance potentially of that commercial valuations.
yeah, 100%. If it's article 4, I mean, me personally, if it's six bed, article 4, you're going to get an investment method valuation out of me. Yeah, that's how we work. you know, like said, we have done some five beds and, know, after discussion with lenders, we'll call that the lender and say, look, very limited bricks and mortar, you know, comparable to here. ensuites massive material change here. So, you know, my personal opinion, you this should be an investment method here because someone is going to come and buy this and just hold this as an asset for maybe a generational asset.
Beats.
And how are you finding lenders?
I mean, lenders are so varied. I mean, like, it is nuts. Like, cannot like what you think one lender loves, you go to another one and they don't like it. you know, and it's, there is no hard and fast rule for them. We've tend to find that certain lenders will be known for doing HMO stuff and they were a lot more receptive to having the conversations.
And broker should probably be engaging with those as well, right? If everything has gone right here, the deal has already landed at the feet of the right lender, the right product, the right valuer and everyone's in the loop on what we're looking for out of this. What sort of tips would you give brokers, any brokers that are in the market to work better with the valuer?
Good question. Like I said, don't be, for me, authenticity is a real big thing. You know, and I've become friends with a lot of brokers over, know, last couple of years. And I think value is do see through that surface level facade a lot of the time. So cultivate actual proper general relationships with valuers and so much so that you can if that valuer tells you that it's not worth that, you trust them and you don't push them and that's what it is. Cause that's the type of relationship you've got with them. You trust their opinion. And just don't, I can't swear again, but like just don't, don't bull them. Just tell them the truth. Don't lie to them. Don't let them get there and be embarrassed. Cause ultimately as well, a valuer, we don't love having to find a number. I think the valuation game would be so much better and completely different.
if we weren't told the sums. So real valuer is running blind every single time. be wild west, but I'd actually be fascinated to see where value stack. Would it be higher? Would it be lower? I have absolutely no idea. I suspect it probably would be lower, but it's., and that'd be better.
Yeah, broadly. It depends on the sales. If you've got obvious sales comparables, you'd like to think you're going to land on the obvious number and no one would have over egged that as well. But I think you're probably right. Yeah, it makes sense. If you could change one thing about how valuations are managed in property finance, what would that be?
It's you're always working to a number. It's weird.
So many things, I think the main thing I would say is that I think lenders generally should have a diverse panel of valuers, know, so the broker gets it. Don't get told just to use one valuer. I think there should be three or four that they're told to use. Obviously you've got Methan and Vass, which are great as well. But I think having a diverse team of professionals for lenders is huge.
You know, some might sit on the more commercially minded side. Some might be ultra cautious and there's a space for both. Yeah. And doesn't mean the ultra commercial guy can't be ultra cautious. Of course, of course they can. It doesn't mean vice versa. So what I would say is I think for managing valuations, think lenders should really take note of who the people are that giving them the work.
That makes sense. There you go. Well, that's a good one. One thing that's interesting is you talked earlier about urgency and borrowers are urgent. Everyone is urgent. Everything they did doing yesterday. Do you think across the industry that delays in surveyor availability are actually, just property access, is that still a major issue?
Access is a pain in the backside. It's really hard. I can promise the world to you. You could say, Col, can get someone tomorrow. I could go there tomorrow. And, you know, it doesn't mean be able to get in or people and a lot of time where it's HMO for arguments sake Yeah. Nightmare because there's five different people in there. Yeah. You're in. Yes, there is an issue with access and dates and times that kind of lot of that comes down to RICs requirements because you have to have you know, a chartered surveyor go and do the inspection. I have my own personal views on that. don't actually think that should be the case. think people are very capable of, you know, you can train someone very highly to go and do, you know, go and do a survey. But obviously we can't adhere to that.
We have to do, yeah, you know, how to send chartered surveyors around, which is fine. And that's what causes the delays a lot of times. So that is the, it's just the bureaucracy that comes with, you know, not the RHS, but you know, just in terms of the Redbook requirements and stuff.
Was going to ask you how do you mitigate those problems? I mean, access is one thing that's an organised borrower, right? Making sure that someone's ready to let you in. Payment. Okay. That makes sense.
A lot of lenders will be like, don't go till they pay. Don't go till they pay. And then the broker will be like, you not paying? I was like, well, they haven't paid. Yeah. They're going to pay. was like, well, it's all good to say that. But we do an evaluation, they don't like it. Yeah. They could go, you know, and the cost to actually chase debt as a business owner, as you, you know, don't know you got a broker you may carry bad debt, it's a nightmare. You know, it's not worth it after time to chase the debt. Yeah. And they're the two main ones. And some just information, tenancy schedules. Yeah. You know, planning documents, schedule the work.
So the bit that matters here in terms of tenancy's schedules as well, I'm guessing if you've got headline numbers that, and the point for people to be aware of really and consider you might have granted access really quick. You might have let someone in, they've taken all the pictures, done the visit, but if they're trying to do numbers, algorithms, comparables, and they're not armed with all the facts, you're shooting blind and you're more likely to have an inaccurate valuation. Whereas actually if you provided all the passing information, that'd be much easier.
More information we have as well as the quicker we can get the job done. It's really simple. So again, that comes down to the brokers in my personal opinion. should be, cause they, you'd be worried if they're submitting applications and haven't got that. Having that themselves. And like I said before, applicants lie. Just be honest from the start, you know, and also other stuff like when it goes like, obviously it's a bit more of the broker side, but just, just lying about all the backend stuff like credit and stuff like that's going to cause delays. you know so just.
Bye bye.
If you're an investor or developer, just be honest. Treat brokers like lawyers. Tell them everything off the start and then you just speed everything up.
Do you think there's a rise in lenders out where there's borrower demand for this, but there's also lenders trying to get there where technology is coming into the valuation process. We're seeing a lot more AVMs, which is an automated valuation model or desktop valuations or a snapshot of a figure for somebody to then action and borrow against. How is that helping or hindering the process overall? What are your thoughts on that?
AVMs, some are good, some are bad. We're actually jumping into that space ourselves, building on one for brokers to kind of find out feasibility beforehand. So I do see a value in it, but I also see how it can muddy the water, soot the current values for arguments. You know, the simple algorithms, they tend to just work off the last sold price and then apply land registry house price data to it. You know, and it's not necessarily, doesn't take into account the wider market
No, there might be an absolute banging comp that sold three roads away that is absolutely perfect, but it's not necessarily going to take that into account. Yeah, sure. So I do fear, not fear, fear is the wrong word. I'll be free if can do something else. But I think it is going to become more more prevalent. AI is huge now. mean, we use AI a lot for kind of dissecting information, reading reports and titles that you know can quickly.
We use AI for our first stage of our audit before we send the reports out. So we've got customer AI that will review our reports, rank it out of hundred and tell us where we need to be to get it to a hundred. So that's what we do at the moment. So we kind of trying to lean on it as much as we can. But you're going to see it more and more. I generally do think the lenders that push AVMs are going to get a lot more work. It wants to do that. And desktops have become more more important as well, I think. But then as a broker, if your client's coming to you saying I want AVM or desktop, just...
it would raise a couple of red flags for me.
Do you think we'll ever get the, the technology that's able to, cause the beauty of the AVMs now is that they work for single dwelling assets, straightforward houses, whether it's a home mover or maybe easy Buy-to-Lets much more difficult to look at the HMO market. And that's taking away from like commercial valves, just just bricks and mortar, because the work you might've done might not be factored in or refer jobs and things like that. Do we think tech is coming that can take that into account? That can help move that, that sort of arena quicker as well.
Mate, I've thought about this so many times. The issue we have with it is, valuers don't tend to love to share data. So if there was a data set of all the valuers, and then we'd happily participate in this as our firm, where your valuation of HMOs gets put into a data set and all the other firms put there, that's when you start to collate some nice real data, which would be quite easy at that point to populate an AVM.
And people like your big firms, you know, knocking out, you know, two, three thousand about a year. They could probably start doing it now. We can probably start doing one, but obviously the more data you've got, the more accurate it can be, you know, and you can look at bricks and mortar. You can look at investment methods, you know, and the way the reports are, know, especially with AI now, it picks up keywords. So can quickly see condition was poor, yield adopted 10 or, you know, so it can be done for sure, but it needs collaboration in the sector which is easier said than done.
Chance mate. yeah. would, if anyone wants to share with us, we would do it.
Yeah, okay. Interesting. Well, you never know, right? Down the line, will innovate and they always sort of have proven that they can do stuff like that. I'll put you on the spot to sort of wrap up. What's going to happen to the property market next 12 months, next 18 months, property prices up or down? What do you think?
I, it depends on what happens with the Labour government at the moment. I won't go too much into that one. But I think commercial is going to be the big trend. I think a lot of people are going to mixed use and title split. And I think that's where the money is.
You're the second person on this podcast series to say that think commercial is. Yeah. and residential property value, think potentially stalling. I know my stuff.
Stalling, do you know what, things that are priced right will sell. Just because things don't sell doesn't mean the market slowed down. It's because agents are desperate to win work. And the easiest way to win work is to over price something. And as soon as you tell someone the price, they've got that money. And if they don't get their money, they've lost that money, but they never had it. But if you actually looked probably at the actual transactional numbers, it's probably just quite a nice steady rise.
So, people when you hear agents, market is rubbish. It's not, it's just because you've been lying to people telling you you can sell something for more than what it's worth.
Well, that's interesting. So market slowly on the up, but more conservatively than people maybe are looking at it. Correct. But you think of diversification into mixed use commercial, slightly different propositions, maybe the move forward.
Correct, mate, stuff like PD on stuff like that, know, ground floor, retail, adding in an extra flat there or not. That's what I've been doing now. I think it's time to be creative and don't necessarily believe all the trainers that you see online that are telling you you can do, buy a property with no money and stuff. Like you still need to have some money to buy something with no money generally. So just be careful.
Yeah, which is absolutely great advice. And one thing we're trying to do here is educate from good people in the market, transacting really well.
So it's really interesting. It's been super helpful. It's been really good having you as well.
Thank you again for watching. Thanks to Colin and Project and Co for giving up their time and giving some great advice for you guys in the market.
Tune in next time to catch up with more.
Welcome back to the specialist scoop by Arya Finance. I am delighted to have Adrien Maloney join me today. Industry giant Adrian.
Um so Adrian's with OSB.
Can you tell us a bit about your role?
So, um I'm the group intermediary director at OSB. Um I guess for those of people that don't know it because it's not our lending brand. Um I oversee our lending channels which are kept reliance for intermediary’s precise um and interbate. Um and I sort of run all the collective sales force that works there whether it's the people on the phones, the people you see in the field, the BDMs, um or the management team. So yeah, quite a wide job.
So, how long have you been there now?
10 in December. 10 in December. Yes. So, God, where does it go? No black hair left, but you know, years of fun. So, it's been good.
And you've been in the market a long time. What's Tell us a bit about your journey in your career.
Oh, blimey me. Yeah. So, um I guess it was 1996, so that's nearly 30 years. Is it nearly um if I do the maths?
And almost by accident, I guess like a lot of people, um I kind of didn't really know what I wanted to do. Um uh a lot of people won't remember the brand,
but um a company called um uh Mortgage Trust opened in Epson where I live.
And I just ended up working in the call centre and sort of progressed through various roles there. Um, one that was exciting, which is uh I worked in what was the biggest broker in those days, John Charcoal, um, looking after that account.
And then I went to work for Portman, which eventually was bought by Nationwide um, and worked in the sales team there. And then 10 years ago, um, I decided to bite the bullet and go back to working in sort of specialist lending, which was um, with OSB and Kemp Reliance at the time. And then of course uh we bought uh precise into the family if you like and here we are today.
Yeah. I mean it's moving from mainstream to specialist. How did that feel at the time? Like obviously I think there's now a bit in the middle which has probably become a little bit more intermingled but back then it was probably two very different halves of the tale.
I think the biggest shock was when you come from a massive organization not just in terms of structure but in terms of the volume of business they write and day one you sit there and look at the difference when it comes in you think have I made the right decision but actually you know it's in in the 10 years it's grown beyond all all belief but it was totally different to go from that level of size down to to something much smaller much much more nimble and much more agile which was the fun part over the years we've seen a little bit of a progression from the more heavy specialist end of the market into the more mainstream. There's a lot more crossover and I think Kent Reliance is a really good example of that, isn't it?
That the appetite has grown and grown and there's more that you would take on than going back five or so years that you would have ever considered.
Yes. If I think 10 years ago, I guess Chem did a small amount of residential, a bit of shared ownership and was just a home for limited company buy to let in in the main because the high street didn't do limited company buy to let. As I guess the market's evolved, you know, over 10 years, the high street's kind of come into limited companies, particularly this year with with some other lenders, but they don't really do those large portfolios or slightly complex properties or or just where customers have an unusual circumstance.
I think that's the beauty of where Kemp Reliance sits and the relationship it has with brokers is you can pick up the phone, talk a deal through and actually it's probably does a little bit more than some of the even some of the other middle specialist grounds.
And your new brand then rely where does that fit in?
Well, yeah, thank you. Um I mean and thank you because you guys have helped with the pilot and the launch.
So we're still in that phase of um bringing it to market but it will and actually the feedback from my team has been really positive and I haven't paid you to say that. I
thank you for that. No it genuinely has been really good and just on where will Residential sit rely will be the Buy to let brand for the group. So what you'll see over time is that we'll stop doing buy to let in precise um and that we'll retire the Kent Reliance um brand as a whole.
I guess within the name that we we branded it there's a little bit of a throwback to the heritage there with with Rely. But I'm really excited about it because not only does it bring I guess the bit we talked about there, the bit about Kemp being a specialist still the ability to do all of that, but we've worked with brokers like yourselves to go how does this platform work? How do we take the heavy lifting out and leave the proper underwriting to the humans? Yeah.
Um so yeah, we'll bring that to full market um very shortly. Um I think it's going to be a game changer if I'm being honest in the specialist market because um you know not we've always been hamstrung by technology but actually we haven't been able to do a lot with technology. We've built this inhouse um and we're able to sort of react to market bits really quickly. We've had brokers involved in the build.
Um and yeah, I'm really excited to get it to market. So um yeah, it will be the big the buy select brand for the group. Yeah. And actually you mentioned brokers quite a few times and you have the word intermediary in your title.
Yeah. You are intermediaries through and through. You've always worked with intermediaries and that's true I think of all your brands. They're all intermediary facing, aren't they?
Yeah. I mean I am. I often say to people probably OSB as a group and a collective is the largest intermediary only brand in the market. There'll be a number of my competitors and a number of people in in in other brands going we do more business that you know but a lot of the high street brands have direct channels direct to consumer we don't um and I look at you know we we set up a high net worth team for our larger borrowers um so we have a relationship almost I think your colleague said outside of concierge service um for those but that's done in tandem with the intermediary so everything we do and we see brokers at the heart of our business is focused around working with you guys.
Yeah I think we do it well. Yeah, you do do it well. And actually, it only really as I asked that question, it only struck me that really you don't have that direct presence. And I think we see that eb and flow a bit in the market. You see a lot of lenders, and I've seen it over the years, they chase the distribution because they think that going direct to market is the holy grail. Um, and sometimes that means cutting out the brokers. And generally it doesn't end well, does it?
I mean, you see a lot of lenders come back full circle after making that decision. Let's go and make friends again, isn't it? Um, but you know, I mean you I won't speak for other other people's lenders or other lenders.
But the bit for me is about 90% I think now of all mortgages come through the intermediary channel post as high as 90%.
I think it is with some channels um or some lenders certainly you know for us it's it's all of it but actually that's more of a a bit that I'm sure come clients need advice. There's so much choice even, you know, look at the specialist market. You know, you've worked in it a long time.
Look at the lenders you have on your panel. You know, it's easy to go that's the best rate, but actually it might not be the best deal or the best experience for the client, service criteria and things like that. So, the market is really broker dominated. Um, and actually for me, brokers do a good job.
You know, you see people signpost in the right direction. I use a broker when I want to get my mortgage done because, you know, I can see what's the best rate out there, but I don't know where they are in service and things like that. So I think you know and especially in specialists it's just you know yeah I I think there's a lot of talk at the moment AI seems to be the hot topic and there are some camps that go brokers won't exist in however many years and actually wider than that you listen to some podcasts where they say that most jobs won't exist in 30 years 50 years or something um I probably am a little bit more neutral on the AI front and I think that the capabilities will keep expanding and it will do more and more and the processing efficiencies will be hugely valuable and it will make us all a lot leaner but what do you think about that where do you sit?
I guess AI is only as good as what you put into it um is is the starting point I think it will I think that we should embrace technology we're doing this with rely we're investing in our platform for the rest of the brands um and tech can make your life easier you know the the key and journey on going to rely um application is 50% of what it is today on our existing platform. So that's tech doing that and is that have you got AI in that or is that just that's inter APIs we've got now I'm not a tech expert but it links into different different bits um in terms of the valuation journey the legal pathway and things like that and so that that's important but you know you can see how you know we if I look at live chat which we operate on the websites we get every year more and more people using that for quick answers you can see how potentially AI AI might work in call centres with more generic questions.
But I think you know at the heart of what we do in specialist lending and it won't you know at the moment almost every case has a human touch. Not every case will have a human touch going forward but for those big complex deals um and also you know we have hurdles where the borrower has to be interviewed well we're not going to get a bot to do that. It's going to probably be an underwriter. So I think AI will have a place and it will evolve.
And I think if you look at mortgage tech and the mortgage industry, it probably hasn't evolved as fast as other other sectors.
I think we're quite poor for tech in the mortgage industry generally. And and actually, interestingly, if you go back to kind of pre-financial crisis, we're almost just catching back up with where we are then. If you look at like GMAC, the like was it 62nd, I can't remember what they called it, but the the offer offers whatever it was.
Um, and we haven't really had anything like that since, have we?
No. But I think, you know, we're in in in terms of I think what will happen now is it will go very quickly and catch up. Now, that's uh not to say, you know, as I said, other sectors are probably more advanced. But if you look even in things like insurance and pensions that the platforms they use are a lot better than we have in the mortgage industry. And it's not that I actually don't think that the mortgage journey is that bad.
Probably come bane in my life is often when it gets to legal because that bit hasn't come along leaps and bounds either. But um I do think you know the evolution of tech and things like AI brokers, lenders will consider how they can use them, how they can make the journey more frictionless. Yeah, I mean it's it's a minefield and like you say it's about what you teach it and I think the tricky part and it's like when you're upskilling people it takes a long time to come across all the different scenarios that you can come across and I don't know about you but I still will have something come up where I'm like I've not seen that before.
No, I've not seen it before. I have to try and work out how to navigate that.
So if if people that have been doing it for 20 plus years don't know how to navigate it there you assume would be limitations to AI. Um but I guess your brain either has that .
I can't quite vision how AI can overtake people. But there are some people who really firmly believe that and I think perhaps perhaps the middle ground or where it will start to do it. May end up doing certain tasks but it doesn't replace the ultimately the person at the end of the day. Yeah. Time will tell. Eh, absolutely. Yeah. One thing I was keen to get your view on is just the state of the buy to let market in general because obviously it's a huge part of what we both do and we've seen some huge changes over the years and it's been it's been getting harder and harder.
Yet, despite all of that, I think it's fair to say there's still big pockets of it that are thriving. um some that are surviving and some that are thriving. And I'm keen to hear your view because you see it quite holistically as a lender because you've got the different channels you know from the more mainstream right through to the heavy specialist end which is the inter bate brand. So, so what are you seeing at the moment?
Well, I think Buy to LET is really resilient like whatever way you look at it and probably the if you if you go back to financial crisis it had never been stress tested because it had never gone through a downturn. Obviously bad luck in the last 10 years since I joined OSB predominantly a B to-let lender.
What do we have? We had regulations, we had tax changes, we've had COVID, we've had Brexit, we've had a Trussomic and it survived all of that because it actually started I think the tax thing was announced in 2016 10 years ago. I remember I just um I just decided to go and join OSB Kemp Reliance predominantly a buy select lender and the tax changes landed and it landed in tandem with the you know uh the P rulings around additional underwriting for for professional landlords and actually you know I always say to people not all regulation is bad not if it safeguards certain things and I think you know from a lending point of view you know the ability to look at the wider portfolio and to look at these these deals in bigger details has made the professional part of the market really secure from a lending point of view a safe bet. Um I think what we do see is that you know buy to let as an entry point if you think.
I don't see too many first-time landlords come into the market and we were talking on the way up here about you know tax changes and and navigating that but certainly for those landlords that are in it full-time and predominantly we see in company names I'm sure from a broking point of view that's very similar as well they're continuing to buy to invest they might have changed their strategy slightly so we certainly see uh more people looking at multiple occupancy high-end HMOs. Yeah.
Um, you know, someone who's sending his son off to to college in a in a few days time, knowing what I'm paying for the year and seeing where he's living. I'm think that's not too bad. I don't remember doing that when I had shared accommodation. Um, and I think it's it's it's those landlords that continue to build and invest. The other bit you got to take into account in terms of the the rental sector as a whole is about only 50% of all of those properties.
It's about a fifth of the the housing stock in the UK has got a mortgage on it. So a lot of people who've got by to that sort of exempt from from some of these bits. Um but you know and I think the other bits that we're starting to see is I guess people have gone out and the importance of tax advice um that you get around that and people that perhaps are disposing of um portfolios they're doing it in share purchases and I think that would be quite a big market going forward. So you know in terms of buy to let yes it's changed um yes it's probably harder if you want to get into it but for those that are in it and know what they're doing it's still a good viable investment. Yeah, and I suppose that probably is where all of the recent governments have been going with it.
They want to professionalize it. So, there has been a drive to get rid of accidental landlords and one-off landlords, whereas I think people used to really like that as a little pension pot, like a controlled pension pot where they could see it and they could go and visit the property and it wasn't someone else managing their money. But that's all but done away with really.
So if I look back 10 years and and obviously the the brand I worked for before had a buy to let lender, substantial buy to let lender. I always remember then a lot of the deals were let to buy. So people who had one property, they go actually it's really good. I can take some money out here, buy the other one with the the the deposit and borrowing was so cheap.
Yeah. Like like you say, yeah. And then have that one as that pension or I'm going to give it to one of my kids or whatever the the planning was around that. with all the taxes I guess now on second properties that might not have been you know if you came to do that today it might not be as viable and also you know if you're a higher rate taxpayer and it's in your personal name all of those hurdles probably make that little bit of the market harder to do which was where a lot of the market was 10 years ago.
Yeah. And the the thing that I suppose concerns me with the market is that it's harder and harder for people to buy their own homes. And one of the unintended consequences here is that rate that rents have just gone up.
Yeah.
Exponentially over the last couple of years because obviously borrowing costs are higher and then the more landlords that are pushed out of the market, the less stock there is and obviously then you've got a supply demand and prices go up. So you need the professional end of the market to outstrip that to ensure that actually people can still afford to rent and and can rent otherwise what you know what happens to the renters' market and I think that's such a valid point and I think that's why you've seen diversification in terms of asset so you know how do I maximize the return you're see as I said you're seeing more people convert properties I guess and we see that through bridging and through our for our precise brand people using the the the the product to change the layout of of properties.
But you're right, I mean, you know, you only have to go into where we are, central London, um trying to get probably there's still cues of people trying to rent waiting lists and the returns and the rents are just going up and up and up. And you're right, is that the unintended consequence of almost pushing landlords that way way down the line?
Because you know as well as you want first-time buyers getting on the market, you want a thriving rental sector to support those that don't want to go on the housing market at this stage.
Yeah, of course you do. And actually, I've got some buy to lets and probably the only positive thing I can say about my buy to lets over the last few years is that rents have gone up. Everything else has been an utter nightmare. And I think I'm not I'm not the professional end of the landlord spectrum because I have a day job so I don't have the time to invest in it like a proper buy to let landlord would.
But it's really challenging. You know, you overcome one hurdle and then you've got new regulation coming out that's sort of Well, yeah, you've got the Renters Reform Act, EPCs. Um I mean, it's it's going to be really interesting around those because I think they ultimately they're going to happen.
But you know, if you just take the EPCC bit as a as an example, um, if you went with a 2030 deadline, which I think is the one for existing tenencies would have to be EPCC. If it goes through, that would mean about 3,000 properties a day needing to be upgraded. Um, pose couple of questions. Where would you get the workforce? Where would you get the materials? Where are you going to get the money?
I think though it one thing that we see and you probably got better data on this but all landlords want maximum loan to value typically you probably have a more holistic view of that but leverage wise we often find that there's not that much left in it in terms of rental coverage and loan to values. So depending on how substantial those upgrades are, that could be quite challenging for people if they don't have the equity or the rental income to service the higher debt levels.
And it's going to be interesting to see if we people throw the word innovation round all the time.
I don't think it's we see much innovation, but I think people throw it all around all the time. You know, someone goes, "Oh, you know, we there's an innovative product with a 7% fee or a 5% fee." Is it really innovative? It's just adjusting a product. But, you know, with some of those work, some of them will be minor to get them up to upgraded to from say a D to a C. But, you know, you you might have points where the property, um you have to have it vacated to do the works depending on the extent of it. You might want to do additional improvements. And it'll be interesting to see, you know, if lenders come up with products that support those upgrades because at the moment, and you you probably see it as a broker, everyone's just targeted A to C.
Um, you know, let's take that stuff that's already there. Well, actually, probably the bigger challenge is how do we get the E and the D's up to a to a C and what's the product that will support that? So, you know, as specialist lenders, I think we should be looking at that market and how we can innovate in that space.
And from a broker's point of view, it's a massive opportunity because there are so many properties. I think it's about 60% that fall outside level C as well.
Yeah. What do you think the biggest challenge for landlords is at the moment? Well, it's probably going to be in November, isn't it? Um, which is the budget at the moment and what might what might come out come out from that. But um I think it's you know some of it must must come down to confidence because you know if you repeatedly beat someone with a stick inevitably you know they're going to get hurt and it does seem that landlords have had a lot levied at them in terms of regulation tax changes etc.
And to the point you made earlier is you know the unintended consequences are probably rents going up and a lack of uh stock and people coming into the sector. But I think, you know, if you know what you're doing, and we certainly see that with the landlords we deal with, the bigger ones, they know their market. They're still seeking out those opportunities. But I guess it's it's the level of uncertainty of what might be next down the line.
I guess it's like anything where there's uncertainty and challenge, there's opportunity.
Some people are in a position to take advantage of that and others not so much. But from our side, we are definitely seeing a lot of really active, repeat property professionals who are quite excited by this market. Um whereas you see some people who are you know they've just got a portfolio in the background or you know they're doing bits and pieces and actually they feel that everything's going against them.
So it probably depends a little bit on the market positioning, doesn't it?
And actually if you think about it, you know, debt is reasonably cheap still. you know, it's probably a bit more normal. People don't feel like that, but you're right. It is. And I I think that's an adjustment that people haven't Yeah.
They've been so used to borrowing at ridiculous interest rates that people think that's normal.
And you know, there's a fair amount of people that will have hoarded cash, I guess, or taken cash out of property when rates were cheap, depending what they've done with it, but they've made improvements. I mean also from just the broker's perspective, the amount of renewals that are coming up over the next 12 months, fixed rate renewals coming off rates and all lenders offering PTS or perhaps properties have gone up in value in certain areas. There's definitely opportunities for reviews. Um, and I guess refinances if that's what people want to do. Um, but I think you're right with that bit that that you said about opportunity.
Um, and we certainly see it with the a lot of the landlords we deal with. they're they're already looking going, you know, can I pick up that bargain?
What can I do work for? And you know, you guys do a lot of the the short-term lending as well. Can I bridge that, do some work, get a return? And as I said, actually terming it out isn't that dear at the moment when you go there's a lot of lot of lenders fighting for competition in the buy to let space.
Yeah. Yeah. Absolutely. And residential market obviously you're in the specialist end of that as well. How's that performing at the moment?
Yeah, there's a lot. We we've seen a lot of demand. We made some real if we talk about the brands at at OSB we've given real clarity there. So you know we
have our commercial brand in interbay rely will be the buy to let brand and precise will use for residential mortgages and for for bridging. We made
a number of enhancements in terms of uh upping the loan to values in in precise to the higher LTVs but also like a number of lenders um we've adjusted the
LTI so people can borrow more. So there's definitely a demand um out there. There's definitely a demand that falls outside of the high street which you know might be a credit blip. It might be one that you're self-employed.
Um and again a bit like what I said actually there's good value in rates out there. People are competing for business. You know that because of the amount of lenders that that you deal with.
Um and and there's opportunities you know things like shared ownership, affordable housing. So yeah, resi's been good for us this year. We've really pushed our foot on the accelerator of pushing precise to be the front runner in that specialist space.
And are you seeing you seeing purchase business? Yeah. Well, as well as refinance.
It's a mix, Lucy. Yeah. You know, um I think um probably you'd say coming out of coming out of August, it's slowed a little bit. And of course, some of the macro headlines don't help that. But still, you know, we're we're pleased with the the numbers that are going there. And again, look, we talk about cost of mortgages. There is some benefits that, you know, you've probably seen cooling in certain areas of house prices as well. And if you're a first-time buyer and you think, "Hey, that's a a good bit." They can now afford those mortgages.
Probably a lot of them with the help of Bank of Mum and Dad as well.
Yeah. Yeah. And and obviously getting your crystal ball out for this one, but there must be there must be quite a few people in your business that give you forecasts and expectations around interest rates. And it's one of the things I'm always asked. So, I'm going to ask you on our viewers behalf, where do you see interest rates going in the short to medium term?
Well, if you'd have asked me that about 3 weeks ago, I would have thought we're going to have another base rate drop.
It's this week, I think, as well, isn't it? So, but I think that that's highly unlikely. I think the base rate will probably stay where it is now into the spring of next year, unless of course you the budget throws something else up,
but but what do I know on that? I think what you are seeing is swaps are you'd say they're still volatile. They bounce up and down, but they're not skewing high.
The swings are quite small, aren't they?
Sort of under five basis points daily generally. So, I think what you're seeing is the rates that you're seeing today are probably the normalized rates till the end of the year. Um, you know, you've got in in residential, I think if you looked at Best Buy, you've probably got a couple of rates just below 4% or just above over 4%. And certainly in biotech, you're looking, you know, five, five and a half percent, which is good enough for a functioning market. Um, but also competitive enough that if people want a deal, they're going to do it. So I,you know, I'm cautiously optimistic.
I think it's a term I always use about how the market is because I think for brokers, there's a lot of refinances. There's a lot of opportunity in that.
And, you know, uh, with regulation coming down the the the road of what we talked in in biotech, there's opportunity there as well. Um but you know I think a lot of it will swing in the specialist market as well.
Yeah. And and the market now I think is quite saturated probably across all of the products that we both operate in over the years following the financial crisis which now feels like so long ago.
But you've just seen it go like that haven't you? And and the the number of new entrance coming into the market both on the intermediary side and the lender
side. And you know, you're all chasing market share, but there's also an element of just trying to do things differently.
Are there any kind of big opportunities that you guys are spotting?
We've um you seen our half year results. We've done really well in commercial and bridging this year. We set out to to do that. I think um it's always nice when a good plan comes. Well, I like to think so. Yeah. Yeah.
get pat on the back. But um I think um certainly in commercial there's a real demand out there. You must see that in your brokerage house as well. Um and again some landlords are diversifying into semi-commercial and commercial assets.
But also you know there's a lot of people that are self-employed and I say this to brokers out there, oh I don't do commercial. I said you deal do you deal with self-employed um applicants? Yeah.
About 50% of my client bank is well you've got some commercial opportunity.
Now, you might not be the expert in that, but there's there's there's people that that can help there. But yeah, I think and again goes back to the importance of the role of the intermediary. There is so much choice for the M borrower. Um that the role of the intermediary is pivotal because there are so many different things that sit behind I guess the experience of the rate or the criteria or the assurity that that lender is going to do the deal. The broker's kind of role is pivotal. But you could argue, you know, you see a lot of new entrance or in the lend I see a lot of new entrance in the lending space or or or people re rebying lenders and I kind of look and go I'm not sure you're doing anything diff different and it's really hard to crack a market where you've got established players in there.
I think so. I think it's really difficult for new entrance and and there'll always be some who are just superstars and they take off and they make it happen. But certainly in the brokerage space, one thing that we've seen is a huge raft of mainstream brokers moving into the specialist market. But it's all about volume, isn't it?
If you don't have the volume, then you don't have the lender relationships in the same way and you don't have that kind of it's the traction, isn't it, with lenders to to be seeing the volume because if you just get one here and there, perhaps you're not heard quite as well as those who are bigger players in the market. and and and you know there are different products that different brokers get depending you know particularly as you go into bridging and commercial that the volutric brokers get because they're I guess subject matter experts actually they get introduced bro business whether it's via broker or direct client that actually their expertise in putting the case together if you haven't done that can be quite valuable as well everyone can say they're an expert in specialist but I do firmly believe that
it's about miles on the clock and it's about what you've seen because I made the point earlier, I still see things from time to time where I'm like, I've literally never come across that before, but there is a lot that I have come across and I know how to navigate, but there's all, you know, everyone has to start somewhere for sure. But there's a lot of people that call themselves experts out there that perhaps the expertise is is a bit on the light side, but it it definitely takes for, you know, a lot of experience, doesn't it?
Years of hard work seeing the deals and and we often say particularly with those more complex deals that when you know done some big deals with our rea over the years is it's how the deal is presented because time makes all the difference.
Exactly. And that you get the the whole story and then you're able to shape the deal and and ultimately you want a smooth process for the borrower as well.
Yeah. And I think that's first impression thing. If you if you send something over and it's not presented in the right way and you lose someone's interest in the first go, it can be really hard to recover it.
Whereas it's all about kind of talking about the case from a rounded perspective because what we don't do is sugar-coat.
You know, if something's there, it's there and you have to talk about it. But it's talking about the problems and the mitigants in the same breathing act, isn't it?
Absolutely. Yeah. which is, you know, comes with time and I'm sure you see all sorts, but probably your bridging business, you see a lot of that because bridging is like a a quick entry to market for some brokers, isn't it? It's everyone sees it as the holy grail.
So, you probably get some real weird and wonderful in the bridging space. Yeah. And our bridging business has has grown.
So we have seen more people people use it and I guess we play more in the regulated space which to a certain extent is probably more basic bread and butter.
What sort of percentage of your bridging business is red? Can you answer sorry if I I can't ask this in the PLC. So yeah, I can't well what I can say is the majority anecdotally yeah anecdotally the majority of our business is iregulate but we're growing into the non-regulated looking at the more complex stuff and of course we do commercial bridging through interbate but you know not everyone comes across commercial bridge every day you probably see more of them in area than an ordinary broker would do and again it's how you position that case and how you put the put the strengths of it but um I think you know from where 10 years ago we did we didn't do bridging at OSB And obviously we did when we acquired Precise, but that market has grown phenomenally and of course more people use it, more people do the exit. So I guess ultimately more brokers have have tried doing that, but um I guess the more complex the case probably is when you you need to pick up the phone to people that that really know that market.
Yeah. And on the reg side, is most of that your typical chain break or do you get people that are using their home to borrow money to go on to do so so you get you get a bit of both. Yeah, chain break is is quite common.
You sort of, you know, um you also do get people who've got an existing asset where they want to utilize that plus the other one to bring down the LTV, bring down the rates and the cost of if they're refurbing the other one or waiting for the other one to go there. But yeah, I think if if you sat there, most of it is bread and butter still that that person selling their home or they want to buy that property quickly with a with a bridge for whatever reason.
Yeah. And you've done bridging across different brands. What's the what's the ambition moving forward for the bridging part of the business?
Yeah. I mean, you know, we have a really strong brand in the precise brand in in the bridging market. Um we want to grow that. We set up um we separated the sales team with with the commercial team and the bridging team. This year we also launched the uh specialist property team in there for those more complex cases where you can speak um to the team there that Peter Greg heads up and you know he's a qualified surveyor so they know the kind of asset classes that we want to do.
So, um, yeah, I'd like to say to those those guys that sort of do some of the bigger bigger stuff, watch out. We we want a bit of that as well. But, you know, there's lenders out that there that do it very well, and we're we're kind of catching into that that group.
And actually, one of the big selling points for OSB is you can do loans with not much of a cap on really, can't you, if the right thing comes along?
Yeah. I mean, some really large transactions.
Well, we we've done some with you and the team, Lucy, which is which is really good. And you know, I guess that comes with having a lending balance sheet of 25 billion. It's a big business. Yeah, it does help and a big savings balance sheet as well. Um, but I think that's where we position ourselves in the specialist market is, you know, we're not fearful of those large transactions. You've seen some of the the press articles of some of the stuff we've done over the last 12 months. It kind of amazed me that some of the stuff we've done, but it's been good business.
Um, and having that understanding of large loans and actually having a process that works, is friendly, engage with the broker, engage with the borrower. Um, and you know, we've made improvements to our valuation panel, our legal panels over the last 12 months to make those sort of deals easier as well.
Yeah. And you have an in-house real estate team, don't you, that will kind of look at the transactions early on to get a feel for whether it's likely to have success at credit committee because obviously if you haven't got those guys on board then you don't do it and and and you know they're very commercially minded. Um and the other bit is of course you don't you know if you're dealing with a borrower ultimately it's your client you don't want to spend what can be tens of thousands of pounds on a survey that comes back and we go we're no longer going to support. So it's just often there's something in what you know before you go to valuation that will kill it with a lender if it's going to kill it.
So we always say to people you're better off frontloading the work and sometimes clients find that frustrating because you are going into a lot of depth. A lot of the time they want to call you up and say I'm buying this property. Can you do it? And and then when you go back and ask them 5,000 questions I exaggerate but 4,999.
Exactly. you you have to kind of really get under the skin of it because otherwise you get down the line and there's something that you could have known really early on if you miss it of course and you're the front person for it is time and money.
I think that goes back to the bit and with all of these in the specialist market like you say it's how the deal is quite often presented.
Yeah. And what do you what do you see over the next 12 months in terms of like market size and opportunity? Do you think that we grow? Do you think that we continue to kind of be steady as we are now? It's a really good question, isn't it?
Um, well, the the potential for more volumes out there in terms of refinance, how big the purchase market is, and whether there are any incentives that are going to help people get on the housing ladder will determine that a little bit. I think like a lot of people, everyone's waiting for that November budget. Get that out of the way. See what surprises or not surprises are in there and then you can you can move on. But I think you know rates will remain competitive unless something dramatic happens. Um house prices are relatively stable to the point we talked about in in BLET. There are investors still looking to buy and there's still plenty of opportunity in residential, commercial and bridging. So from a specialist point of view I think we're in we're in quite good shape.
Yeah. Often when the market's challenging the specialist end of the market does better. That's what we hope so. Right. Yeah. Absolutely. Well it's good for us isn't it? But obviously we want a healthy market overall and really in order for that market to be healthy you need the market to be moving. You need there to be transactions because it's what and I guess confidence conf I think confidence is everything actually isn't it and when you talk to people you get a feel for where their head's at and that really is quite reflective in the numbers in the market and I know it obviously changes a little bit from you know what sectors you're in but we find throughout the year this year we came out really strong yeah the first quarter was really really strong and then obviously there was a little bit of a um stamp duty cliff again, wasn't there?
Which we saw impact the market because I think you get all that momentum and then you go off a cliff a little bit, but then it feels actually like there's some excitement and positivity out there despite the headwinds.
I think we both said the summer was all right. You know, you kind of go, you know, August is August, people go away, but actually we sat there both going on the way up. Actually, it was busier than we thought. And actually, you go into September, things have kicked on, people are doing business. Um it's just about finding that make sure you're the the right one to support.
Yeah, I mean there's definitely been headwinds but I think there is pent up demand and I think there has been for quite some time. The expectation from borrowers is starting to align more whereas we've spent a good couple of years where people have just gone that's so expensive I can't I'm not doing it at that rate and you you sort of let people go off investigate the market that's right.
Yeah. Yeah. Exactly. And I think there's a lot more pressure on pricing than there was when all of the rates were, you know, okay, you still had some that were in the Best Buy tables and some that were slightly more expensive, but it felt like clients were prepared to pay more of a service premium previously, whereas at the moment, our experience at the front end, and I don't know whether you are as exposed to that or not, but obviously you're, you know, you're fairly close to the ground just because of the relationships you hold, but we find that there's a lot more shopping around and there's a lot more pressure on pricing that we're having to really explain it and and go back again and sometimes you're forced actually to because we always talk to people if there's a better product out there but sometimes people are sort of really hellbent no that is the one I want to do and and even when you're saying look I know it's got a great headline rate but I'm just not sure that's going to be the right one to get this done and often your instinct is right and we're finding that faced with that challenge more and more.
I think because um there's so much pre more talk and press and social media about where you can find mortgage rates in so many different channels now can't you someone goes I want that and you're going but that's not that's not you that one's you but they they then shop around and see if someone will do it like that and quite often you know we do see people have gone away they've gone for that rate someone's pushed them in or not pushed them they've gone with the what the client wanted it comes back they go oh they didn't do it and you end up doing in the deal as well.
So, there's a lot to be said for trust in experience and in what your broker advises you because I think, you know, they know a lot more than just the headline rate.
Yeah, absolutely. We've both been doing this a long time. New people, new entrance to the market. Like, what advice would you give to anyone looking to start a career in the mortgage industry?
That's a good question. I mean, I said at the start of this, I probably ended up coming into it um by accident, but there's never a dull moment. Um there's lots of different roles. Um there's that I would recommend you know people mortgage finance boring.
Actually it's not. The people in this industry make it. Um and actually we're crying out probably for a new generation of people coming into the mortgage market and you know I look at our own business um the success we've had of people that we took on on the telephone teams really basic entry jobs. Three of them are now BDM. So, if you push yourself, um if you embrace what you can learn there, there's still really good opportunities here.
And I think, you know, um financial services, mortgages in particular, specialist mortgages because they're more interesting, right? They're not done by the machine.
Um I think it's crying out for people that want to learn, are ambitious, um and are prepared to drive and challenge themselves. So, I think it's a really good sector.
Yeah. The barriers to entry are relatively low as well, aren't they? If you look at other professions like law and accountancy and things like that, it is relatively easy to get into the mortgage industry. I had no qualifications to manage this.
Me neither. I think it's actually quite quite a common theme in our sector. But um but you know I think it's really good and there's businesses like ourselves doing apprenticeships. There's you know paths that you can follow and you know within I'd choose our business within what we do at OSB. um if you come in on the sales team and you came in at an entry level um and you want to progress, there's clear pathways on how you can do that and people that you can learn from with bags of experience. ]
So, you know, I think um and it's busy that, you know, it's a really great sector for people to come into.
Yeah, I agree. And we we've always tried to bring in people in entry- level positions and train them. And I think actually that's where you often get the best quality of people from, isn't it?
Because they get to experience it first- hand and there's no sort of preconceived ideas about how things should be done and you know I look at people that you know have worked for for me or worked for the business and moved on to other things and they've all progressed and you know you don't sometimes you don't want to leave lose them because they're really good but also you don't want to hold them back and um you know I'm really pleased to see that you know some of the young people that have have worked with us they've either gone on to the they've actually gone to the other side and worked in broking and done really well or they've gone to other other lenders and progressed their career careers in different ways.
So, um I think you know coming out of school, coming out of college, coming out of university, if you're not sure what you want to do, it's actually a good I call it good playground to come in and and create an opportunity for yourself.
Couldn't agree more.
Thank you. Thank you very much. We really appreciate you joining us.
It has, hasn't it? It's been great to talk all things mortgage industry and um yeah, thank you.
My pleasure. Thank you.