Tag Archives: crisis
Easier monetary policy could weaken Brexit effect on UK real estate
The hit to UK real estate sentiment that many experts predict will be sparked by the vote to leave the European Union may be limited by easier monetary policy, it is claimed. While uncertainty in the run up to the referendum had little effect on domestic real estate pricing this year, investment activity slowed but an analysis report suggests that this hasn’t been exclusively caused by Brexit fears but largely reflects greater investor caution as the market reaches the top of the cycle. However, according to Chris Unwin, head of global research at Aviva Investors, the vote to leave suggests there is now little hope of any bounce in sentiment. ‘Indeed, it may be many years until we have clarity on the UK’s constitutional arrangements and trading agreements,’ he said. He pointed out that the financial markets’ reaction to the vote was swift and dramatic with Sterling falling to its lowest against the US dollar in over 30 years and 10 year gilt yields reaching a record low. And, as equities plunged, real estate shares were particularly badly hit. He believes that mounting fears of an economic shock and in the short term, uncertainty as to the UK’s constitutional arrangements and trading agreements, will dampen activity and may trigger a recession by the end of 2016. In the longer term, the economy is likely to be impaired by reduced access to European markets and poorer demographics, weakening the UK’s fiscal position and potentially damaging productivity growth. On top of this calls for a second referendum on an independent Scotland will grow and great further uncertainty. ‘Domestic capital values now look likely to decline moderately over the remainder of the year. It is worth noting, however, that some commentators believe Brexit will hit real estate returns, and the economy, more severely. By contrast, we had expected to see a slight increase in capital values over coming months had the UK voted for the status quo,’ explained Unwin. He expects to see prolonged illiquidity in real estate markets pending renegotiation of international agreements and transaction activity to be low while heightened risk aversion will reflect lower growth expectations and political risk. ‘To compensate, some widening in yields is probable. Secondary assets are likely to be hit even more,’ he added. However, Sterling depreciation could support demand from overseas investors but Unwin pointed out that this needs to be balanced against the UK real estate market’s diminished ‘safe haven’ status along with additional caution in Scotland resulting from pressure for a further independence referendum. Unwin thinks UK occupier markets could be affected significantly less than investment markets. ‘In the short term, a rapid deterioration in the labour market is not expected. Demand for space is not set to fall rapidly,’ he said. ‘If the weakness of sterling is maintained, UK retailers could be hit, particularly those operating on low margins. On the other hand, it may boost prospects for markets dependent on tourist spending, like prime central… Continue reading
Spanish property expert says Brexit will affect demand from British buyers
A weak pound, plus the uncertainty about what comes next following the UK's decision to leave the European Union, will undermine British demand for property in Spain, especially in the short term, it is suggested. This should be a concern as British demand has been growing strongly since 2013 and according to Mark Stucklin of Spanish Property Insight there could now be a reversal in that trend. He believes that this will have a negative impact on the markets where British demand is dominant, namely Alicante and Malaga, and to a lesser extent the Balearics, the Canaries, and Murcia. ‘Thanks to this Brexit vote, there will just be fewer British buyers about,’ he said. One reason is that British demand in Spain is driven by the strength of the pound. When the pound goes up against the euro, British acquisitions inscribed in the property registry rise with a delay of around two quarters. ‘Now we have a weak pound plus the dramatic situation of a Brexit, so falling sales in coming quarters are almost a given,’ Stucklin explained. He pointed out that it won’t be good for British vendors either. ‘They now have a smaller pool in which to find a buyer. Price expectations may have to adjust even further down,’ he added. He also expects fewer British people to move to Spain until the deal for exit is struck and that will take a minimum of two years. ‘British expats in Spain will now be in limbo until the new order is established. That could take years, and in that period I expect to see more British expats leaving than arriving,’ he pointed out. British owners of holiday homes in Spain with no plans to sell won’t be affected much for now. A much bigger worry for them is what will happen to the UK, or whatever is left of it when the dust settles. Figures from the registrar of Notaires confirm that British demand for property in Spain grew strongly last year on the back of a strong pound and attractive Spanish property prices. Buyers from the UK were the biggest group by a wide margin, making up 21% of the foreign market and increased the most by up by 42% last year. Indeed, in some regions like Alicante on the Costa Blanca and Malaga on the Costa del Sol, the British dominate the overseas buyer market. On the other hand for those who want to buy in Spain properties will be cheaper due to the Pound falling making currency exchange more favourable for changing into euros. However, those wishing to move permanently to Spain who are reliant on a British pension will get fewer euros for their money. Continue reading
Survey suggests UK property owners carry out work to create their dream home
British home owners renovate their property for living in for the long term with the majority not doing so to increase the price, new research suggests. Some 67% are planning to stay in their home for over five years and carry out work with the aim of creating their dream home, according to the research by Zopa with kitchens the top target for change. The survey, of over 1,200 people who had taken a Zopa home improvement loan, found that 27% either have had or plan to get their home revalued after renovations, and only 9% said they would need to move to be in their ideal home. So far in 2016, Zopa customers have borrowed over £50 million to improve their homes, a 54% increase on home improvement loans compared to the same period last year. Some 34% used their home improvement loan to revamp their kitchens and, of those who said their homes are not yet perfect, 19% cited a bigger kitchen as top of their wish list. After renovations two out of five people say they are now in their perfect home. Of those who still don’t think their property is perfect, 22% said they would need to move. The most commonly cited areas for improvement were better decoration at 31%, bigger kitchens at 19% and more bedrooms also at 19%. The research also found that the majority, 73%, used professionals to complete their home improvements, with 45% using skilled professionals for the entire job while 13% undertook all the renovations themselves and the same number sourced help from family and friends. Some 77% said they’d be happy to do painting, with 51% ready to take on wallpapering and 32% happy to complete tiling but people were least confident when it came to masonry work at just 6%, bricklaying at 7% and plastering at 10%. The survey also found that 4.2% were considering moving to unlock the increased property value with 98% agreeing that their renovations have added value to their home. Some 27% believed the increase to be worth between £11,416 and £19,027, adding between 6% and 10% to the price while 19.4% said it would be an increase of between £20,930 and £28,541, a 11% to 15% rise in value and 11.4% expected to see an increase in value of over 21%. Continue reading
