Will new cladding criteria get the market moving again?
New research published this week by credit rating experts DBRS Morningstar drills down into the financial consequences of the cladding crisis. The analysis is revealing, illustrating that cladding is much more than a safety hazard. With an estimated 1.5 million flat owners in the UK hit by issues around fire safety as a result of the way their homes have been constructed, huge numbers of leaseholders are struggling with mortgage, insurance and debt issues.
A key finding from DBRS Morningstar’s analysis, based on a sample of 670,000 mortgage loans, is that fire safety repair bills (even after accounting for differences in labour costs) are not necessarily proportional to property value. This means that borrowers in parts of the country where property values are cheaper could have repair bills which, relative to their property value, are higher than in London.
But there is now some good news for flat owners wishing to move or re-mortgage. Yesterday the RICS released a new guidance note on valuation of properties in multi-storey, multi-occupancy residential buildings with cladding that aims to unlock the flats market.
Drawn up in collaboration with the fire safety industry, insurers and lenders, the guidance sets out new criteria to identify those buildings where remediation work that may materially affect the value of the property, is likely to be required.A supplementary information paper has also been produced to better inform surveyors and improve their knowledge of the typical external wall cladding systems that may be encountered in the course of the external wall fire review process.
Let’s hope it helps. Because there are still thousands of flat owners out there whose lives have been put on hold by this crisis. A change to the way lenders and insurers develop their risk profiles is badly needed. The new guidance may enable them to take a more nuanced and proportionate approach. Large numbers of blocks still await remediation before residents can move on – but for at least some leaseholders, there may now be a chink of light.
Author : Maryanne Bowring
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