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Outlook for investment in Scottish commercial property market positive
With talk of another referendum in Scotland if the UK votes later this month to leave the European Union new research has found that Scottish independence is not a priority for UK property investment. Investors believe that they will still invest in commercial real estate in Scotland as long as yield outperforms other regions as the issue of Scottish independence ranks lower in importance than rental yield, capital growth and a stable tax environment. Just 21% of property investors said independence was an important factor, less than half the 46% who mentioned rental yield, according to the Morton Fraser survey. Overall one in four property investors is open to investing in Scotland with 11% actively monitoring or currently pursuing opportunities. Proportionately, this is above the nation’s 8.9% share of the UK commercial real estate market. It also shows that 85% believe that leaving the EU would have no impact at all on their likelihood to invest in Scotland and 79% of property investors claimed Scotland separating from the UK would not affect their decision to invest. ‘It is easy to overestimate the potential impact of Scottish independence on the property market. Investors are ready to enter the market if the right opportunity arises, regardless of the political status of the country,’ said David Stewart, commercial real estate partner at Morton Fraser. ‘That gives us optimism for the future of the Scottish real estate industry. If the price is right and the market conditions are at least on a par with other regional areas across the UK, investors will follow the returns. The prospect of a neverendum in Scotland may drag investment, but it’s not the deciding factor for many,’ he added. With rental yield the number one criteria for potential British property investors looking to enter the Scottish market, Morton Fraser has uncovered the ‘tipping point’ at which a yield premium would encourage investment. Of the property investors likely to invest in Scotland if there was a higher yield premium, 70% said a benchmark of more than 3% or higher would encourage them to invest, with 31% saying more that 5%. That figure should be viewed in the broader context of many respondents being initially cold on investing in Scotland, so the true figure for active investors is likely to be sharper. ‘Many investors are prepared to overlook ideological or political issues to run the rule over Scottish property investments. The yield gap between Scotland and other regional cities in the rest of the UK can always be met with a quality opportunity whether you are looking to invest in Edinburgh or Manchester, Glasgow or Bristol, a high quality asset will always stand on its own merits,’ Stewart added. Continue reading
Apartment rent growth slows in the United States
Apartment rent growth in the United States has slowed nationwide over the past year, with the higher end of the market most affected, new research shows. After growing at a blistering pace for much of 2015, apartment rents across the county are growing at a slower pace thus far in 2016, according to the data from real estate firm Zillow. Overall, apartment rents nationwide grew by 3.6% for the year ending in April 2016, almost 2% points slower than the 5.4% pace reported for the year ending in April 2015. And in 23 of the nation’s 35 largest housing markets, the slowdown in rent appreciation has been more acute in luxury ZIP codes area than metro-wide. In four additional markets of Washington D.C., Sacramento, Miami-Fort Lauderdale, and Kansas City broader apartment rent growth has accelerated from 2015, but it has accelerated less in luxury ZIP codes than in the metro as a whole. Aaron Terrazas, a senior economist at Zillow, said that substantial investment in new construction, particularly at the high end of the market, has contributed to some of this pattern, although in some areas weak labour markets may also be a contributing factor. The research also shows that in the Houston metro, essentially all ZIP codes where the median rent per square foot is above $1.10 have experienced a deceleration in apartment rents. In the New York metro, the natural cut off appears to be closer to $2.30 per square foot and in the San Francisco metro, it appears to be around $3.80. The exception is the Seattle metro, where higher apartment rent growth continues to accelerate in luxury ZIP codes, although the acceleration has perhaps not been as dramatic as lower priced ZIP codes. Terrazas explained that part of this is due to rapidly rising rents in neighbourhoods north of Seattle’s Lake Washington Ship Canal. Meanwhile, the latest national index produced by Florida Atlantic University and Florida International University shows that housing market as a whole is moving deeper into buy territory, suggesting that, on average, residential housing markets around the country are sound. The Beracha, Hardin & Johnson Buy versus Rent (BH&J) Index measures the relationship between purchasing property and building wealth through a build-up in equity compared renting a comparable property and investing in a portfolio of stocks and bonds. It says that in terms of wealth creation the US housing market, when considered as a whole, has swung marginally more in favour of home ownership over renting a comparable property and investing monthly rent savings in a portfolio of stocks and bonds. Overall, 16 of the 23 metropolitan markets investigated moved in the direction of buy territory. The metro areas of Boston, Chicago, Cincinnati, Cleveland, Detroit, Milwaukee, Minneapolis, New York, Philadelphia and St. Louis remain solidly in buy territory. ‘These cities should have room for price growth without much worry of overheating,’ said Eli Beracha, co-author of the index and assistant professor in the T&S Hollo School of… Continue reading
EU referendum causing uncertainty in UK property market with prices set to fall
Increasing uncertainty is weighing on the UK residential property market which could result in prices falling, according to the latest monthly housing report from the Royal Institution of Chartered Surveyors. The report paves out a scenario where prices could experience a short term drop due to uncertainty surrounding the referendum later this month on the future of the UK in the European Union. It would be the first such fall since 2012. The most recent polls are putting the Leave campaign marginally ahead of the Remain campaign and in many areas of business and economic life in the UK this is causing a wait and see attitude. This is already affecting the property market according to the RICS report which says that prices across the UK saw only modest growth in May while prices in central London fell. On top of this demand from buyers is falling at the fastest rate in eight years. RICS predicts that house prices nationally are set to dip over the coming months, while rents increase while in central London some 35% more property professionals are reporting that prices had fallen rather than risen over the past month. While prices are continuing to climb modestly across the rest of the UK, this trend looks set to fade, with 10% more respondents predicting that prices would fall rather than rise over the coming three months. This is the first time that a fall in prices has been predicted since 2012. London and East Anglia are expected to be worst hit with 43% and 33% of respondents saying that prices will fall over the next quarter. ‘Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market. Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the forthcoming EU referendum coupled by a slowdown following the rush to get into the market ahead of the tax change on the purchase of investment properties,’ said Simon Rubinsohn, RICS chief economist. ‘Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market,’ he added. Buyer demand fell across the UK for the second consecutive month and at the fastest pace since 2008, with 33% more property professionals saying that demand decreased last month. The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents look set to outpace them, with UK rents predicted to increase by 4.7% year on year for the next five years, compared to house price increases of 4.1%. The number of agreed sales also fell for the second consecutive month with a net balance of 22% of respondents reporting a fall rather than a rise in activity. However, Thomas van Straubenzee of prime London property agents VanHan, believes that… Continue reading
