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Prime central London property rental values fall for first time since Feb 2014
Rental values in prime central London fell in July as stock levels held up while demand from the financial services sector became more subdued against a jittery global economic backdrop. The fall of 0.1% was the first decline since February 2014 and meant annual growth slowed to 2.9%, having peaked at 4.2% in May while prime gross yields were flat at 2.95%, according to prime central London index from Knight Frank. It explains that stock levels have been buoyed to some extent by a restrained sales market, where an increase in stamp duty for properties worth more than about £1.1 million has dampened activity and price growth. According to Tom Bill, head of London residential research at Knight Frank, as annual price growth has slowed to 2%, more property owners have opted to become landlords as they wait for the market to digest a succession of recent tax changes. He explained that this short term supply/demand imbalance means two things. First, tenants are shopping around more and securing deals has become more difficult for landlords, even after initial agreements are in place. Second, landlords have made it more attractive for tenants to remain in place, prompting higher renewal rates. ‘While seasonal demand from students has remained strong, corporate demand has become more muted despite some pockets of stronger performance,’ he said. The report points out that demand in the prime central London lettings market has traditionally been strong from the financial services sector but optimism among bankers fell sharply in the second quarter of 2015, according to a CBI/PWC survey. ‘Continued regulatory uncertainty means banks are scaling back spending plans and nervousness surrounds a possible UK exit from the European Union, the recent Greek crisis and Chinese stock market volatility,’ Bill said. ‘However, there are longer terms grounds for economic confidence, and the UK’s recovery was underlined by strong GDP figures in July. Furthermore, in an attempt to increase the appeal of London, Chancellor George Osborne plans to reduce the bank levy,’ he explained. ‘Meanwhile, Brevan Howard, one of world’s largest hedge funds, is reportedly moving senior traders back from Geneva to London, underlining the city’s dominance as a global financial centre,’ he added. Continue reading
Investment in Irish office property market sees record performance
Total returns from investment property in Ireland hit 6.3% in the second quarter of 2015, rising above the 4.3% returned in the first quarter of the year, new data shows. Offices continued to lead the market, returning 7.4% in the last quarter, and 37.7% year on year compared with 33.0% in 2014, another record performance figure for the office sector, according to the figures from the IPD/SCSI quarterly property index. Following a slight dip in the previous quarter, the higher returns for Irish offices stemmed mainly from a strong occupier market, with rental value growth at 6.1% in the second quarter far higher than for the other main sectors. The index report also says that rental growth is now firmly established as the key driver of office returns, taking over from the re-pricing that drove the office market recovery in its early stages, when investor confidence began to return. The 12 month return for Irish commercial property of 33.7% to the end of June 2015 was more than double that for the UK over the same period which was 16.7% according to the IPD UK monthly property index. ‘The index shows that it has once again been a very strong quarter for Irish office investments. That said, we have also seen an improvement in the industrial sector, with total returns rising 250 basis points over the course of the second quarter of 2015,’ said Colm Lauder, MSCI senior associate. ‘The prime retail sector recorded a significant pickup in rental performance during the second quarter, with market rents climbing by 4.4% on Grafton Street as confidence returns to the retail trade. Values on Ireland’s leading high street have grown by 49% in the last 24 months, although this still leaves values 62% off the 2007 peak,’ he explained. ‘Investment pricing on Grafton Street showed an equivalent yield of 4.5% at the end of June, a long way off the 2.6% level achieved during the boom years,’ he added. According to Pauline Daly, of the Society of Chartered Surveyors Ireland (SCSI) said that the increase in returns in the second quarter reflects strong activity levels in the market across all subsectors. ‘An interesting trend has been the change in transaction type in the second quarter from the large portfolio sales in the first quarter to a larger number of individual asset sales in the second quarter,’ she explained. ‘We are also seeing more investment spread to the regions, particularly in Munster, which is good news from a competitiveness perspective and a wider pool of investors involved in the market which is likely to ensure liquidity and continued growth in investment volumes for the rest of the year,’ she added. Continue reading
Two tier house prices growth continues in Australia led by Sydney and Melbourne
The two tiered growth evident across Australia’s housing markets continued in July with Sydney and Melbourne driving home values higher, the latest monthly index shows. The CoreLogic RP Data Home Value Index increased by 2.8% month on month and 11.1% year on year and the total aggregated value of Australian housing increased by just over half a trillion dollars over the past 12 months to $6 trillion. Melbourne has traded places with Sydney to record the highest rate of capital gain, with values in the city up 6.1% over the three months ending in July, the highest rolling quarterly rate of growth since the three months ending August last year when values grew 6.4%. Growth in Sydney wasn’t quite as strong over the rolling quarter, up 5.4% but still the highest rate of growth since the March quarter this year when it was 5.8%. ‘To date, the capital cities have seen remarkable differences over the growth cycle which broadly commenced at the end of May 2012 and since that time dwelling values across our combined capitals index have increased by 30.4%,’ said Tim Lawless, CoreLogic RP Data’s head of research. Sydney values are 47.9% higher over the current cycle and Melbourne values are 32.1% higher while every other capital city has seen growth of less than 13% over the same period. Lawless explained that this highlights the extent to which the Sydney and Melbourne markets have outperformed other markets over the past three years. He pointed out that over the last year several cities have seen price corrections. Darwin has seen values falling the most, down by 5.3% while in Perth values also drifted lower over the year, down 0.3%. At the same time, the annual rate of capital gain in Sydney reached a new cyclical high with home values moving 18.4% higher over the year to the highest annual rate of growth for Sydney since the 12 months ending in December 2002. The strongest growth conditions outside of Sydney and Melbourne have been in Brisbane where dwelling values were 3.9% higher over the year. Based on the median dwelling price, Sydney prices are now 72% higher than Brisbane’s and Melbourne’s are 24% higher. Detached housing continued to outperform the unit sector, with house values substantially outperforming unit values over the past year apart from Hobart and Darwin. Detached home values are up 11.6% compared with a 7.2% increase in unit values over the past year. The differential is most pronounced in Melbourne where house values have surged 12.3% higher over the year compared with a 4.8% rise in unit values. ‘The higher growth rates for houses compared with units is likely to be supply related, with the underlying land component driving detached housing values higher at a time when new apartment supply has seen a substantial boost from new construction,’ Lawless said. While dwelling values continue to rise across most cities, the pace of rental growth has slipped to a new record low, which has… Continue reading
