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Recovering UK economy boosts prime rental values in the South East
Prime rental values in the Home Counties in England rose by 1.9% between April and June, driven by the recovering UK economy and an increase in rental demand from corporate tenants. Annual rental growth stands at 4% as corporate demand makes the spring and summer months the most active as families relocating for work look to move before the start of the new school year. And while corporate demand is not back to the same levels seen before the financial crisis, it has stepped up notably, according to the latest index from real estate firm Knight Frank. Between April and June, corporate tenants made up some 47% of all tenancies commenced across the Home Counties, up from 29% during the comparable period in 2014. In the area, which comprises the counties of Berkshire, Buckinghamshire, Essex, Hertfordshire, Kent, Surrey, and Sussex, quarterly rental growth for one bedroom properties was 0.4% compared to 1.5% for four bedroom homes. Corporate demand came from a range of industries in the three months to June, including the oil and gas, technology and pharmaceutical sectors, as well as from finance workers, according to Oliver Knight of the firm’s residential research team. ‘Additionally, there is anecdotal evidence to suggest that corporations are also stepping up their budgets which has translated into more competition for larger properties. This is certainly reflected in stronger rental growth being recorded in larger properties than smaller ones in the second quarter,’ he said. He also pointed out that demand for prime rental properties in the Home Counties continues to be widespread, with some 47% of tenants coming from outside of the UK between April and June, led by tenants from North America. ‘Tenants relocating from the US are often most active during the first half of the year, with many looking to complete moves ahead of the American and International school term starting in August,’ explained Knight. A breakdown of the figures show that overall 53% of tenants are from the UK, 27% from North America, 7% from both South America and Europe and 3% from both Asia Pacific and Africa. The index report also shows that the number of potential tenants, both corporate and private, registering with Knight Frank lettings agents so far this year rose by 7%, compared to the same period last year. The number of applicant viewings was 24% higher over the same time, which Knight said is an indication that activity should continue to be robust in the coming months. Continue reading
Price of Manhattan apartments reach new record high
The average price of an apartment in New York’s sought after Manhattan sector reached a record US$1.9 million in May, the latest research data shows. This was up from US$1.8 million in the previous month while the total number of sales was virtually unchanged at 876 for the month, according to the report from City Realty. The firm says that May was the priciest month in NYC real estate history with Downtown seeing the most expensive sales. Overall the average price of a condo was uS$2.5 million and the average price of a co-op was $1.4 million. There were 367 condo sales, up from 365 in the preceding month, and 509 co-op sales, down from the 515 recorded in April. The top sale was for a 12th floor unit in the Soho condominium The New Museum Building, at 158 Mercer Street. The 7,837 square foot apartment, which has five bedrooms and five bathrooms, sold for US$34 million, or $4,338 per square foot. The second highest sale was for a 6,000 square foot penthouse unit in the condominium at 737 Park Avenue which sold for US$32.7 million, or US$5,440 per square foot. The third top sale was a four bedroom co-op at 778 Park Avenue that sold for US$28.5 million. Downtown was the highest-grossing region in Manhattan, with $323 million in condominium sales. Midtown was the second highest grossing area, with $227 million in sales. Downtown also had the highest price per square foot at US$1,982, which was virtually unchanged from the prior month, and the Upper East Side had the second highest at US$1,788. Continue reading
Warnings over impact of buy to let mortgage tax change announced in UK Budget
The UK property market is set to see a number of impacts as a result of a mini Budget announced in July aimed at stabilising the country’s economy. Perhaps the most controversial announcement by Chancellor of the Exchequer George Osborne was a cut in tax relief on mortgage interest payments for buy to let landlords which some believe will ultimately lead to higher rents. The Chancellor also, as expected, increased the rate at which inheritance tax will be paid on a home to £1 million and increased room rental tax relief to £7,500 per annum. Although phased in from 2017 to 2020, the buy to let tax change will make investment a less attractive proposition for landlords. Indeed, it will discourage investment in the sector which could lead to higher rents and less rental homes available, according to Graham Davidson, managing director of Sequre Property Investment. ‘This is an example of politicians not understanding how the market operates, directly contradicting their apparent goals for an improved private rented sector. Landlords should be free to deduct legitimate costs, just like any other business does,’ he pointed out. Gráinne Gilmore, head of UK residential research at Knight Frank, described it as ‘a significant change in tax status’ for those with a rental portfolio. ‘Those planning to purchase a buy to let property will have to factor these new rules into their calculations, and this could affect the offers they are willing to make,’ she said. 'If the relatively low yield environment seen today, especially in the South of England, is still evident when these changes start to come into force, there could be upward pressure on rents. The need for rental accommodation is strong, and we expect this trend to continue, especially in city centre markets around the UK,’ she added. Jamie Morrison, private client partner at HW Fisher & Company, believes it will lead to higher rents. ‘It will cause many landlords increasing pain which will quickly be passed on to tenants in the form of higher rents. Highly leveraged landlords could pull out of the market too, reducing the supply of rental properties and ratcheting up rents even further,’ he said. According to Russell Quirk, chief executive officer of online estate agent eMoov, landlords are going to be up to 20% worse off as previously enjoyed tax relief rates of up to 45% disappear. ‘Based on the average rent they could be up to £2,000 worse off each year. I can only see the result being an increase in rental prices which in turn further hampers those trying to save to get on the property ladder,’ he explained. Henry Woodcock, Principal Mortgage Consultant at IRESS, pointed out that buy to let has been the key area of growth in the mortgage market and changing its tax treatment is likely to dampen mortgage activity and demand from property investors, which will hit overall lending figures. ‘Equally, we may see a number of landlords leave the… Continue reading
