Q3 2023 Portfolio Efficiency Announcement | London Home Trade

Under you can find our Q3 2023 efficiency announcement. This consists of; up to date monetary data on all properties, up to date particular person unit particulars, property disposals, growth loans, dividends and different vital data for traders. 

To make sure that all shoppers have the chance to think about this announcement, the Trade shall be suspended as traditional, for 3 working days, re-opening at 10am on Friday 3 November 2023.

Essential upcoming dates 

As we speak’s bulletins

1. Portfolio efficiency
2. Dividend distributions
3. LHX Mortgage Bonds
4. October/November 5-year Anniversary Properties
5. Property growth loans
6. Properties with fireplace issues of safety
7. Upcoming quarterly bulletins

1. Portfolio efficiency

As we speak (31 October 2023) now we have revealed up to date monetary data for each property, together with internet earnings, mortgage particulars and the online money place. You could find this data on the prime of every property’s respective funding web page, within the ‘Financials’ part. 

The ‘Particular person Unit Particulars’ part, a tab inside the ‘Financials’ part on every property’s funding web page which offers detailed data on a unit-by-unit foundation, has additionally been up to date to replicate the most recent standing of each unit and contracted lease for let items. This tab is up to date month-to-month and means that you can monitor gross sales progress for all properties voted on the market as a part of their 5-year anniversary course of. 

All data is up to date to 30 September 2023. 

Market overview

Regardless of important will increase within the curiosity base price, inflation continues to stay stubbornly excessive at 6.7% within the 12 months to September 2023 (Workplace for Nationwide Statistics). Whereas the headline determine remained unchanged from August, core inflation was very barely down in September and inflation is predicted to lower in October on account of falling meals costs. There may be due to this fact an growing chance that the Financial institution of England will maintain rates of interest at 5.25% on the subsequent MPC assembly on 2 November; nonetheless with the UK’s inflation stage remaining the best within the G7 by a substantial margin, additional price rises should not out of the query. 

The numerous will increase in the price of borrowing and the influence this has on housing affordability is inserting downward strain on home costs and that is being mirrored in market knowledge. Nationwide reported a 5.3% fall in home costs within the 12 months to September 2023 and Halifax a 4.7% fall over the identical interval. These decreases are broadly consistent with home value predictions from trade specialists; with Savills predicting a ten% fall in home costs in 2023, Knight Frank a 5% fall, JLL a 6% fall and the Workplace for Funds Accountability a 7.2% fall. 

The variety of transactions out there can be down, with knowledge from HMRC displaying that the variety of UK residential transactions in August 2023 was 16% decrease than August 2022. Furthermore, HMRC provisional knowledge is displaying that 2023/24 transaction numbers within the monetary yr so far would be the lowest within the final 10 years, bar 2020/21 when the nation was in a protracted interval of lockdown; a view not too long ago echoed by Zoopla, who predict there shall be circa 1 million transactions this yr, 20% decrease than the long-term common. 

Residential portfolio unit standing

The desk under offers a abstract of unit standing by class throughout the residential portfolio at 30 September 2023. The modifications since 31 March 2023 proceed to spotlight the concentrate on promoting residential items, as we search to repay mortgages and fulfil shareholder mandates to promote properties following their 5-year anniversary votes.  

Rental efficiency

We’ve got been proactively finishing up lease evaluations throughout the portfolio, resulting in elevated rental efficiency. Throughout 269 tenanted residential items, contracted lease grew by 8.6% within the 12 months to the tip of September 2023. By comparability, common rental progress throughout UK non-public rented residential property was 5.7% over the identical interval (ONS Index of Non-public Housing Rental Costs). 

Unit gross sales

There have been 18 residential items gross sales accomplished in Q3 2023, amounting to £3.84m in property worth. Throughout these accomplished unit gross sales, gross sales costs had been on common 0.4% under their vacant possession worth (VPV) and 9% above their buy value. 

Regardless of the housing market slowdown we’re persevering with to promote a lot of items, nonetheless as we reported in Q2 2023, we’re persevering with to expertise a marked enhance in agreed gross sales falling via, primarily resulting from mortgage affordability. According to market traits, we’re seeing longer than common gross sales intervals, and in some circumstances, decrease provide costs in comparison with the newest unbiased valuations (e.g. on some items the best provides have been decrease than the valuation). 

Purchasers can see the efficiency of agreed and accomplished gross sales within the Particular person Unit Particulars of every property and on our Promoting File.

Mortgage debt

Because it stands, the common rate of interest throughout our mortgaged portfolio stays at 8.2%, which is unaffordable for almost all of residential properties. The price of servicing mortgage debt erodes rental earnings and is the first cause for dividend suspension throughout the portfolio. 

We’re persevering with to pay down mortgage debt wherever doable, predominantly via unit gross sales and £2.8 million of mortgage finance was repaid over the last quarter. The whole portfolio mortgage loan-to-value (LTV) decreased to 45.4% at 30 September 2023, from 46.3% at 30 June 2023. 

2. Dividend distributions

From 6 November, one property will restart paying dividend, Compass Court docket, Eastbourne at 2.50% p.a. 

The common internet dividend yield on the 8 properties distributing dividends is 4.25%.

3. LHX Mortgage Bonds

Following latest unit gross sales in Mortgage Bond properties throughout Q3, there has partial compensation of capital with curiosity in 2 bonds and full compensation of capital and curiosity in 1 bond:

• The Jubilee Mansions Mortgage Bond has been repaid in full with curiosity. Bondholders achieved a complete return equal to a median rate of interest of 9.14% p.a. accounting for will increase within the Base Price over the bond’s time period. 
• The 15 & 25 Anchor Level Mortgage Bond has been partially repaid with professional rata curiosity, equal to an rate of interest of 9.25% p.a. 25% of the mortgage bond stays in place, secured with first authorized cost on the remaining unit with bond traders persevering with to accrue curiosity at a present price of 9.25% p.a.
• The Backyard Court docket Mortgage Bond has been partially repaid with professional rata curiosity, equal to an rate of interest of 8.68% p.a accounting for will increase within the Base Price over the bond’s time period. 51% of the Mortgage Bond stays in place, secured as first authorized cost on the remaining items, with bond traders persevering with to accrue curiosity at a present price of 9.00% p.a.

The Mortgage Bonds and their charges are offered under, however please notice the subsequent Financial institution of England base price choice is developing on 2 November and any change to the bottom price shall be instantly handed immediately on to bondholders, altering the every year rate of interest for every of our Mortgage Bonds: