Britain’s biggest property investor has warned of “more distress coming” for landlords as they battle sliding valuations and spiralling debt costs. However, Aviva Investors is not complaining because it sees the challenges faced by the sector as a “buying opportunity”.
The commercial property market has been effectively paralysed since last autumn, with few players looking to add to their portfolios given sharp falls in the value of real estate. Even those that have wanted to strike deals have been unable because debt has been too expensive.
Aviva Investors, which has £24 billion invested in property, mostly in the UK, is the investment division of Aviva, the British insurer. While others have sat on the sidelines, it has invested £1 billion in UK commercial property this year. Over the past 12 months, it has spent nearly £1.6 billion.
“We’ve put a lot of money into the market and that’s been taking advantage of what we see as a great buying opportunity,” Ben Sanderson, its managing director of real estate, said. The biggest chunk of its money has gone into rental homes and warehouses.
Commercial property valuations broadly peaked in 2021, but the mini-budget last autumn triggered chaos in the bond markets and sent borrowing costs soaring, bringing on a sharp downturn in values. Given such a backdrop, Aviva has reported “relatively little competition” for buildings, allowing it to pick up some assets on the cheap. For example, it bought a warehouse this year for 40 per cent below what the site had been worth last December. “Obviously valuations have fallen, but then [the seller] also had redemption pressures and needed an exit,” Sanderson, 53, said.
Aviva has remained so active because it has enough firepower not to rely on debt, which has become increasingly expensive. Similarly, changes to its funds that give it more time to repay investors wanting to cash out mean it has not faced heavy redemption pressures.
Danny McHugh, 50, Aviva Investors’ chief investment officer, insisted there was further liquidity available to take advantage of opportunities. “There’s a sequence of pricing triggers . . . The bit we haven’t seen is a repricing as a result of liquidity pressures on refinancing. The other aspect we haven’t seen is a repricing due to demand and economics.”
Sanderson said there was a “huge financing gap about to come” as owners that needed to refinance found they could not borrow as much as they had hoped and that their properties were no longer worth what they had thought. “The pain has not come through yet on the scale that we think it will at some point. There are going to be some more serious pressures coming forward.”
Almost exactly what I said would happen.
A property crash with high interest rates doesn’t mean cheap houses for everyone, it means open season for those with the liquid currency to snap it all up without borrowing – Big business.
Be careful what you wish for, property crashes are not something to celebrate.
Vultures feeding on the carcasses of homeowners betrayed the government.
Nobody can be blamed for taking the low rates; they were the rates at the time. The tories absolutely can be blamed for throttling the housing market and crashing the economy overnight.
And right on cue, the vultures arrive.
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*Tom Howard, August 29 2023, The Times*
Britain’s biggest property investor has warned of “more distress coming” for landlords as they battle sliding valuations and spiralling debt costs. However, Aviva Investors is not complaining because it sees the challenges faced by the sector as a “buying opportunity”.
The commercial property market has been effectively paralysed since last autumn, with few players looking to add to their portfolios given sharp falls in the value of real estate. Even those that have wanted to strike deals have been unable because debt has been too expensive.
Aviva Investors, which has £24 billion invested in property, mostly in the UK, is the investment division of Aviva, the British insurer. While others have sat on the sidelines, it has invested £1 billion in UK commercial property this year. Over the past 12 months, it has spent nearly £1.6 billion.
“We’ve put a lot of money into the market and that’s been taking advantage of what we see as a great buying opportunity,” Ben Sanderson, its managing director of real estate, said. The biggest chunk of its money has gone into rental homes and warehouses.
Commercial property valuations broadly peaked in 2021, but the mini-budget last autumn triggered chaos in the bond markets and sent borrowing costs soaring, bringing on a sharp downturn in values. Given such a backdrop, Aviva has reported “relatively little competition” for buildings, allowing it to pick up some assets on the cheap. For example, it bought a warehouse this year for 40 per cent below what the site had been worth last December. “Obviously valuations have fallen, but then [the seller] also had redemption pressures and needed an exit,” Sanderson, 53, said.
Aviva has remained so active because it has enough firepower not to rely on debt, which has become increasingly expensive. Similarly, changes to its funds that give it more time to repay investors wanting to cash out mean it has not faced heavy redemption pressures.
Danny McHugh, 50, Aviva Investors’ chief investment officer, insisted there was further liquidity available to take advantage of opportunities. “There’s a sequence of pricing triggers . . . The bit we haven’t seen is a repricing as a result of liquidity pressures on refinancing. The other aspect we haven’t seen is a repricing due to demand and economics.”
Sanderson said there was a “huge financing gap about to come” as owners that needed to refinance found they could not borrow as much as they had hoped and that their properties were no longer worth what they had thought. “The pain has not come through yet on the scale that we think it will at some point. There are going to be some more serious pressures coming forward.”
Almost exactly what I said would happen.
A property crash with high interest rates doesn’t mean cheap houses for everyone, it means open season for those with the liquid currency to snap it all up without borrowing – Big business.
Be careful what you wish for, property crashes are not something to celebrate.
Vultures feeding on the carcasses of homeowners betrayed the government.
Nobody can be blamed for taking the low rates; they were the rates at the time. The tories absolutely can be blamed for throttling the housing market and crashing the economy overnight.
And right on cue, the vultures arrive.
They’re all at it,
[https://www.independent.co.uk/business/lloyds-bank-aims-to-be-uk-s-biggest-private-landlord-by-2025-b1905081.html](https://www.independent.co.uk/business/lloyds-bank-aims-to-be-uk-s-biggest-private-landlord-by-2025-b1905081.html)
[https://propertyindustryeye.com/john-lewis-unveils-plans-to-become-a-major-private-landlord/](https://propertyindustryeye.com/john-lewis-unveils-plans-to-become-a-major-private-landlord/)
And don’t expect anything to change because…
[https://www.landlordtoday.co.uk/breaking-news/2021/7/revealed–how-many-mps-are-landlords](https://www.landlordtoday.co.uk/breaking-news/2021/7/revealed–how-many-mps-are-landlords)