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Prime central London annual price growth at lowest since 2009
Annual price growth in prime central London fell to 2.8% in April, the lowest rate since November 2009 and is unlikely to change much this year, according to a new market analysis. Growth has been on a downwards trajectory in recent months ahead of the general election, but the Conservative Party victory suggests April is likely to mark the low point in the cycle, says the analysis report from Knight Frank. According to Tom Bill, head of London residential research at the firm, the principal effect on the prime London property market is that the election result has removed the prospect of a mansion tax on properties worth more than £2 million. ‘We believe this will lift transaction levels but the extent of any short term boost to prices is less clear cut. It will also be significant to note to what degree the opposition Labour Party moderates its policies around wealth creation and taxation and whether this reduces the rhetoric of the wider economic debate,’ said Bill. He believes that following the Conservative Party general election victory, several short term outcomes are likely. ‘First, numerous transactions put on hold pending the outcome of the vote will proceed as the risk of further property taxation appears less of an immediate threat. Other sales will progress simply because the election is over and a deeper sense of political uncertainty has receded,’ he explained. ‘As the logjam unblocks, it is likely to be accompanied by a hardening of expectations on the part of vendors over asking prices and some will expect prices to immediately rise as a direct consequence of the election result,’ said Bill. ‘In the short term, the impact on pricing is likely to be less marked than some expect due to the quantity of properties coming onto the market. Many vendors lined up sales for Monday 11 May, irrespective of the outcome of the election. Also this short term increase in supply is likely to exceed any uptick in demand. Activity in the prime London market has dampened in recent months as buyers and sellers factor in political risks but also as they digest measures like the stamp duty increase,’ he explained. ‘The market is in the final stages of absorbing these changes, meaning some buyers will still proceed with care. Furthermore, some prospective buyers will have signed rental contracts as they hedged their bets on the outcome of the election, meaning they are unable to act for several months,’ he added. Bill also pointed out that there is likely to be a short delay before a supply/demand equilibrium returns and a likely ‘expectation gap’ between asking prices and the prices that new and newly active buyers are prepared to pay. ‘However, price growth is likely to return more quickly in markets that have underperformed the prime central London average, including areas in Kensington and Chelsea where there has been low single digit annual growth in recent years,’ he said. Bill explained… Continue reading
US commercial real estate recovery lags behind residential, say agents
The US commercial real estate market still faces its share of challenges but property agents specialising in the sector are confident that marked improvement seen over the last year will continue. At a commercial economic issues and trends forum National Association of Realtors chief economist Lawrence Yun led a panel discussion about the forces shaping commercial real estate markets. The panellists agreed that the market has improved and expressed confidence that continued recovery in the economy will drive commercial real estate growth. ‘Commercial real estate usually recovers two years behind the economy. However, NAR members who practice commercial real estate are seeing a three to four year wait. It has been a long and slow recovery, but it is happening,’ said Yun. The forum heard that there are still headwinds facing the commercial sector. Subpar Gross Domestic Product growth, stagnating wage growth and low employment rates are all affecting demand for commercial properties. Yun explained that improving those underlying fundamentals is instrumental in maintaining a strong commercial market and another major hurdle facing the recovery is the lack of financing available for small investors. While large companies can access financing from Wall Street or international buyers, most financing for smaller investors still comes from regional or local banks and credit unions. Many of those small banks are hesitant or reluctant to give out commercial loans. ‘New financial regulations for all banks, big and small, are resulting in smaller banks bearing proportionally higher compliance costs. The little guys are taking the brunt of this. Maybe there should be waivers for smaller banks so they can give out the loans businesses need and help with community development,’ Yun added. According to Sam Chandan, founder and chief economist of Chandan Economics and associate faculty member at The Wharton School of the University of Pennsylvania, when it comes to multifamily homes Millennials love to rent. They prefer the flexibility and proximity to amenities that comes with renting rather than owning. However, that fails to take into account that while Millennials will always be Millennials, Millennials will not always be in their twenties. You could ask a 22 year old at any point in history if they want to own a house in the suburbs, move away from urban centres, or own a minivan and they will say no. But that answer has changed in the past and it will change again, and the multifamily sector needs to develop a narrative that takes that into account,’ he explained. The same problem is affecting other commercial markets, such as retail. Online commerce has changed the way commercial retail positions itself and attracts buyers. ‘While it’s true that you will never be able to get a haircut online, the same cannot be said for buying books or groceries. We cannot assume that because people always shopped at grocery stores that they will not learn and adopt another way,’ said Chandan. ‘The commercial market needs to develop a narrative that evaluates how… Continue reading
UK first time buyers waiting longer to get on housing ladder, new research suggests
First time buyers in the UK are having to wait longer than planned to take their first step onto the property ladder according to new research. Some 65% have had to wait longer than they hoped to move into their dream home, while only 8% managed to become a home owner quicker than planned, the first time buyer’s survey from Clydesdale and Yorkshire Banks shows. The figures show a slight improvement on the previous 12 months when 68% had to delay getting on the property ladder, however the largest percentage, 17%, of those who are unable to meet their home ownership deadline are waiting between one and two years longer than planned. The challenge to get on the property ladder means that the majority of new home owners plan to stay in their first property for a number of years. Some 21% plan to stay for between four and five years with 19% having no intention of moving from their home for nine to 10 years. In both the Midlands and the North East the largest percentage plan to stay in their first home for between nine and 10 years in comparison to London, South West and Wales where the highest number aim to keep the keys to their first home for between three and four years. ‘Clydesdale and Yorkshire Banks have extensive experience of helping first time buyers get onto the property ladder and we know how difficult it can be to buy your first home,’ said Steve Fletcher, director of retail banking. ‘It is positive that our research shows that there is a small improvement on the previous year, however almost two thirds of first time buyers still face challenges in meeting their own timescales for being a home owner,’ he added. Clydesdale and Yorkshire Banks are currently offering a range of first time buyer mortgages with a £1,000 cashback. These include a three year fixed rate mortgage with a 90% LTV with a rate of 3.59% and a three year fixed rate mortgage with a 95% LTV and rate of 4.89%. Continue reading
