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European commercial real estate investment up 2.5% in second quarter of 2016
Commercial real estate investment remained strong across Europe in the second quarter of 2016 totalling €54.0 billion, up 2.5% on the previous quarter and 30.4% on the 10 year average, new research shows. However, overall activity fell short compared to the second quarter of 2015 with the office sector having the strongest quarter, seeing an 8.3% increase on the first three months of 2016, driven by a particularly strong performance in the Nordic region. The research from CBRE also points out that despite uncertainty in the UK caused by the European Union referendum, sentiment remained strong in other European markets and investment levels were stable year on year. Investment volumes in France and Sweden, Europe’s third and fourth largest markets, were particularly resilient. The data shows that over the last year investment in these markets has grown 32% and 20% respectively. Indeed, second quarter results in both France and Sweden were boosted by buoyant office sectors. Ireland also performed extremely strongly, transacting a record €2.3 billion of commercial property deals in the second quarter of 2016, more than double that of the same quarter last year, although the sale of the Blanchardstown Centre for close to €1 billion closed during this quarter. Poland followed suit, transacting €1.5 billion in the second quarter, over three times the level recorded in the same period last year. But Germany showed decreased levels of investment in the second quarter, which is likely connected to a lack of availability of stock in the core markets, which dampened the European total. Core property in Germany remains highly regarded as a safe haven and sentiment remains strong. The UK also performed less strongly than its continental European counterparts in the run up to the Brexit vote although strong fundamentals continue to underpin the UK market. The recent depreciation of sterling, coupled with low interest rates, has attracted the attention of overseas investors to the UK, and with the spread between bond yields and property being the widest on record, the fundamentals of UK and continental European real estate remain attractive. ‘Whilst investors have reacted cautiously to Brexit, the market fundamentals remain strong and investors still have significant capital to deploy. The uncertainty means that many investors will watch and see how the market develops before deciding how to act, said Jonathan Hull, managing director of Investment Properties EMEA at CBRE. ‘However, sentiment is already improving as the UK enters a more stable political environment and there are signs that the market is responding positively to this,’ he added. According to Miles Gibson, head of UK research at CBRE, the EU referendum risk was undoubtedly one factor affecting investment activity in the second quarter. ‘But instability in the financial markets earlier in the year was similarly important in causing investors to be more risk averse,’ he added. Continue reading
Caution due to Brexit likely to affect UK housing market in short term
Caution is likely to affect sales in the mainstream housing market in the UK as a result of the decision to leave the European Union but low interest rates will underpin prices, according to a new analysis. The market is seeing initial caution, particularly among discretionary buyers, and this likely to curtail housing market activity as buyers’ willingness to commit to a major purchase weakens. Over the medium term, the analysis from real estate firm Savills, suggests that sentiment will improve but also fluctuate as negotiations to leave the EU proceed. It also suggests that buyer sentiment is likely to lead to lower sales volumes in the short term. Also, the possibility of tighter lending could pull transactions numbers further down from recent UK highs of 1.3 million a year. ‘However, at this stage, we do not expect sales volumes to decline to post credit crunch lows,’ said Lucian Cook, director of residential research as Savills. The report points out that so far it has been business as usual for lending. ‘Should downside risks persist, there is a possibility that lenders tighten lending criteria. If stricter borrowing rules come into play, first time buyers and second steppers will be the most affected,’ Cook explained. He believes that low interest rates will underpin house prices with the prospect of a cut in base rates and this may present opportunities for those on low loan to value mortgages. Overall, house price growth is likely to slacken as a result of weaker demand in the short to medium term but looking ahead, Cook said that the possibility of a slower economy could have an impact on price growth. ‘We do not rule out the possibility of price falls in weaker markets. Low levels of house building has resulted in a market that is fundamentally undersupplied. This has not changed,’ he added. The analysis report also points out that the short term impact on sentiment is also likely to vary geographically and between different buyer groups, in part dependent on the level of opposition to or support for Brexit. That would potentially indicate more caution in the domestic markets of London and among first-time buyers and second steppers but less among mature home owners. ‘While this short term sentiment effect is likely to take longer to feed into the house price indices, we would expect the first indications of this impact to come from consumer confidence surveys and mortgage approvals,’ Cook pointed out. ‘At this stage, it appears that the downside risks to the housing market are milder than the events that led to the 2008 financial crisis. However, political and economic uncertainty is likely to curtail housing market activity initially as discretionary buyers exercise caution,’ he said. ‘The potential for lenders to tighten lending criteria presents a longer term risk to market activity, especially among first time buyers and second steppers. This could mean that UK housing transactions, which reached a post credit crunch high… Continue reading
Lettings agents call on UK govt to help restore confidence in lettings market
A leading group of lettings agents in the UK is calling for the Government to take action to restore confidence in the residential lettings market in the aftermath of the vote to leave the European Union. There has been a cooling in investment in the lettings market due to pre-referendum uncertainty, plans to cut mortgage tax relief for landlords and now Brexit, according to Belvoir Lettings, at a time when there is growing tenant demand. ‘With the Bank of England hinting at further reductions in interest rates, which will continue to hit savers, property remains a very attractive long term investment opportunity, particularly for those with cash to invest,’ said Belvoir managing director, Dorian Gonsalves. ‘However, in some areas continued uncertainty over the future of EU nationals in the UK is having a negative impact. For example, in Boston in the East Midlands, which was reported as being the most pro-Brexit town in the UK with 75% of the population voting to leave, thousands of EU workers remain anxious about their immigration status,’ he pointed out. ‘We hope that the Government will act quickly to resolve this uncertainty and reassure EU citizens about their future in the UK. This will also help to reassure those overseas landlords who are also expressing concern,’ he added. Indeed, Donna Burrell, owner of Belvoir Boston, reports that although the rental and sales market has now picked up, there is continued anxiety amongst Eastern European workers, with many now adopting a 'wait and see' attitude before committing to investments. ‘During the build up to the referendum we noticed that business was quiet. Belvoir Boston now provides an estate agency service, and prior to the referendum many Eastern European tenants who had been working and renting in the area had started to buy the properties they had been renting. Now that Britain has voted to leave the EU we have noticed a more cautious wait and see approach and some have pulled out of sales,’ she explained. ‘There has also been some racist backlash from a minority group, which is making Eastern European tenants and foreign investors feel uncomfortable about committing to investment. Boston is reliant on Eastern European migrants to work in factories and keep local businesses afloat. If these workers feel forced to leave, it could potentially be catastrophic for the town, its people and local businesses,’ she pointed out. ‘I really hope that the Government will end the uncertainty by giving out a strong message of reassurance, as many of these people have worked and lived here for several years, and contribute enormously to the community,’ she added. According to Emma Falco, co-owner of Belvoir Peterborough, Brexit has been a hot topic for landlords and tenants, but whilst there is a lot of conversation surrounding it, it doesn't seem to have deterred serious investors. ‘In fact, I think many still have the 2008 crash in their minds and are hopeful that they may be able to pick… Continue reading
