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UK home owner confidence dips as mortgage concerns rise
Home owners in the UK are less confident about further house price growth in the next six months and many are concerned about getting a mortgage, new research shows. The housing market sentiment survey from Zoopla reveals that confidence has now fallen a 15 month low and it also found that 39% of respondents believe it is harder to get a mortgage than it was three months ago. Overall the survey found that the proportion of home owners expecting property prices in their area to increase over the next six months has fallen from 92% three months ago to 88%, the lowest level since July 2013. Home owners in the East of England are the most bullish about continued house price rises, with 91% expecting property values to increase over the next six months. The South West has seen the most significant drop in confidence over the past three months, with the proportion of home owners anticipating further price gains falling from 95% three months ago to 85% today. Following the implementation of stricter affordability criteria for borrowing, 39% of those homeowners surveyed stated that they thought it was more difficult to get a mortgage now than it was three months ago. ‘The property market signals are somewhat harder to decipher at the moment than they were a few months ago,’ said Lawrence Hall of Zoopla. ‘With the lengthier funding approval process following the Mortgage Market Review and fewer homeowners predicting that house prices will continue to rise in the short term, the coming months will be crucial to determine if the housing market recovery has stalled or simply paused for breath,’ he added. Continue reading
Developers struggling to meet demand for luxury homes in London
The number of luxury homes currently being planned or under construction in London hit a record high this year, with around £60 billion of properties currently due to be delivered over the next decade. This is a 20% increase on 2013. However, with significant capacity issues at every level of the capital’s construction industry, a huge proportion of these properties are unlikely to be built on time, according to a new report from EC Harris. It reveals that this year, the capital’s 10 year pipeline of high end property has grown by around a quarter to a record 25,000 homes. However, with developers and investors struggling to keep pace with seemingly insatiable buyer demand, up to half the new homes planned in the next five years could end up falling well behind schedule due to a lack of available contractors to deliver the required quality of work. ‘With the UK economy back on track and London deemed a safe haven for international property investors, it’s not surprising that demand for luxury homes is fuelling ever increasing development,’ said Mark Farmer, EC Harris head of residential. ‘Where we are starting to observe real problems, though, is in the construction process. There is simply not the capacity out there to meet demand and many projects will undoubtedly fall by the wayside or experience delivery difficulties due to sheer lack of resources,’ he explained. ‘Many developers and investors, when in a position to do so, are therefore looking to jump the queue and are paying premiums for construction so they can deliver on promises they have already made to their purchasers,’ he added. In terms of location, the South Bank is proving the most popular area of the capital for development, accounting for around a third of new projects. This is closely followed by Chelsea and Fulham and the City. The report points out that the appetite for high end residential property continues to reach well beyond the traditional West End heartland, with high profile developments such as One Blackfriars and Bishopsgate’s Heron Plaza demonstrating the spread into a much broader swathe of central London. Therefore, to avoid losing out on investment returns in the current strong sales market, some developers are being forced to pay premiums to contractors in order to secure their services. It concludes that this rush to market has provoked significant price inflation in the construction sector as developers seek to urgently get building work underway with the best available tradesmen and project delivery expertise. Continue reading
UK commercial property set to see strongest returns for 25 years
The UK commercial property market may achieve returns of over 20% for 2014, making it the strongest return the country has seen in the last quarter century, according to new research. With liquidity in the market and increased investor confidence, performance for the year is forecast to be exceptional, says a new report from global real estate fund manager M&G Real Estate. Although in the medium term, M&G Real Estate’s research anticipates the market reverting to the trend level of between 6% and 8%. But the UK Real Estate Market Outlook report for September 2014 highlights that heightened confidence in the UK’s economy, with growth ahead of its closest competitors, the United States and Canada. Confidence is triggering increased occupier demand, particularly in the office and industrial markets. This demand is resulting in lower vacancy rates and accelerating rental growth. At a time of low supply of stock owing to previous constrained levels of construction, the UK property market is now attracting substantial interest from both UK and international investors. Rapid yield compression, aided by rental growth, has pushed average capital values up by 6.7% over the six months to August 2014, according to IPD. Despite declining yields, investors’ risk appetite looks set to grow with property yields continuing to offer a sizeable spread above bond yields as shown in the chart below. Notably, secondary offices in the South East are now outperforming prime assets, proving that prime is not always best. Throughout the rest of the country, secondary stock is catching up with those of prime assets as risk appetite increases but the better end of secondary will likely remain much preferred over the weaker end. ‘The UK economy and property market are experiencing rapid growth, leaving behind a period of difficulty that discouraged risk appetite across the board. It’s a different picture now as the weight of capital targeting the sector is showing no signs of let up,’ said Richard Gwilliam, head of research at M&G Real Estate. ‘Investors, however, should not be blinded by a high short term yield without fully assessing the risks to the long term income stream of an asset. The strongest option for investors looking for mid to long-term rental growth is the office market encircling London, particularly those fringe areas benefiting from infrastructure projects,’ he added. Continue reading
