Tag Archives: crisis
UK private rented sector index shows marginal hardening in yields
Total returns from private rented sector investment grade blocks in the UK slipped towards the end of 2014, according to the latest sector index. This was the result of slightly more modest capital growth and a moderate slowdown in average rental growth across the six cities monitored by the Knight Frank index. The trend in capital growth reflects the wider market, with average pace of growth UK residential prices for owner occupied properties also easing from 11% annual growth in the summer to 7% at the end of the year. Average initial gross yields in London, Leeds, Bristol, Birmingham, Manchester and Glasgow were 6.3% in the fourth quarter of 2014, the index also shows. Overall, average total returns at 11.2% in the quarter and average capital growth was 6.5%, down from 7.3% in the second quarter of 2014. Gross yields ranged from 4.2% in central London to 8% in Leeds. ‘It is interesting to note, however, the shallower discounts on offer on institutional grade blocks, a reflection of the increasing interest in the PRS sector in some key city markets,’ said Grainne Gilmore, head of UK residential research at Knight Frank. The report shows that in the fourth quarter of 2013, the average discount on offer for purchase of whole sale block in Manchester was 13% but this has now fallen to 11%. Likewise, average discounts in Birmingham have fallen from 14% to 12% over the same period. The research also shows that the fundamentals for private rented sector investment blocks remained regionalised in 2014, with capital growth ranging from 3.2% in Bristol to 11.4% in outer London in the fourth quarter. Average rental growth was also spread over a wide range across the UK, not only by region but by type of property. Annual growth in rents in a typical ‘secondary block’ in London Zones three to six rose by 0.96%, while average prime blocks in Manchester saw annual rental growth of 2.99%. The regions also commanded the highest yields, with average gross initial yields in Birmingham of 7.9%, and Leeds of 8%. In contrast, yields were tightest in central London, at 4.2%. The research shows that over the past 12 months there has been a sustained increase in momentum within the PRS sector from both large institutional investors and smaller developers. ‘As the investment market becomes increasingly familiar with PRS fundamentals, we have witnessed a notable rise in capital injections within key regional centres such as Manchester,’ said Lucy Jones, head of investment lettings and management at Knight Frank. ‘Occupier demand for rental accommodation is strong in these locations, with good take up levels, low void periods and relatively high yields. Due diligence remains a prerequisite amongst investors, meaning that financial viability modelling for proposed schemes has never been more important,’ she explained. ‘We are also seeing divergence among clients about the type of approach they favour in terms of their investment. They may be planning to be hands on, which means we will… Continue reading
Overseas buyer confidence strengthening in Italy
With the euro at a seven year low against the pound and prime prices in some parts of Italy at their lowest level since the financial crisis, buyer confidence is strengthening, it is claimed. According to Rupert Fawcett, Knight Frank’s head of Italian sales, stock levels remain high. ‘As we move into the traditional spring selling season, more good quality homes are coming onto the market. Not only are vendors being more realistic on price but in some cases prices are 30% below their 2009 peak, with even larger margins being observed in areas such as Umbria and Lombardy,’ he said. ‘There is a growing sense that prices have reached the bottom of the curve and that whilst we are unlikely to see price growth in the short term, we are also unlikely to see significant falls. Sterling and the dollar are now at record highs against the euro making a second home purchase in Italy even more attractive to buyers from the UK, the US and increasingly amongst expats who have relocated to Asia,’ he explained. He also pointed out that the European Central Bank’s decision to introduce quantitative easing at the end of January may ultimately lead to a stronger Euro but it has, for the moment, strengthened confidence amongst Eurozone purchasers. The Greek election result by comparison has had little impact on enquiry levels. All of these contributing factors have led to a visible increase in enquiries and viewing numbers. The number of viewings generated by Italian properties on Knight Frank’s website jumped 31% between December and January. ‘This is an indication that recent currency fluctuations and the ECB’s shift in policy is impacting on buyers’ minds,’ added Fawcett. In terms of the focus of demand, the firm has found that Tuscany continues to generate the highest number of viewings and sales, but Liguria, Venice and Rome are also attracting strong interest. ‘The latter two underline the increased interest in city living, with Florence joining this triumvirate. Whilst an improved lifestyle remains the key motivation amongst buyers in Italy, the potential investment opportunity is increasingly a consideration for those looking at a city purchase,’ Fawcett said. He added that apartments provide an easier ownership route without the need for a large capital outlay and minimal ongoing maintenance. Continue reading
UK house prices up almost 10% in year to December 2014
UK house prices increased by 9.8% in the year to December 2014, down from 9.9% in the year to November 2014, according to the latest official figures. House price annual inflation was 10.2% in England, 4% in Wales, 5.5% in Scotland and 4.9% in Northern Ireland, the figures from the Office of National Statistics show. The index report says that house prices continue to increase strongly across the majority of the UK, with prices in London again showing the highest growth. Annual house price increases in England were driven by an annual increase in London of 13.3% and to a lesser extent increases in the South East of 11.5% and the East at 11.4%. However, excluding London and the South East, UK house prices increased by 7.4% in the 12 months to December 2014. On a seasonally adjusted basis, average house prices increased by 0.7% between November and December 2014, the data also shows. In December 2014, prices paid by first time buyers were 9.5% higher on average than in December 2013. For existing owners, prices increased by 9.8% for the same period. According to Graham Davidson, managing director of Sequre Property Investment, the annual increase in 2014 in London is not sustainable and prices simply cannot continue to grow at this rate throughout 2015. But Adrian Gill, director of Your Move and Reeds Rains estate agents, pointed out that house price growth has wavered recently and quietened down from a thunderous charge earlier in 2014. ‘But property values ended the year on a stronger note, with a sturdy monthly upswing in December. Rankings of annual growth across the country still read in neat geographical order with price inflation flowing out from the London and the South East, and northern regions bringing up the rear,’ he explained. ‘Schemes like Help to Buy have jump started growth in these regions, where homes are cheaper and prices still to break free of the long shadow of the recession. While the London market is adjusting to more sustainable conditions and taking a breather, other parts of the UK now have their moment to shine,’ he added. He also said that it is encouraging to see new price records being set in Wales and the West Midlands in December. ‘Lower stamp duty and record low mortgage rates should act as further injections of support to make sure the housing recovery drives further forward across the country,’ he added. Continue reading
