Tag Archives: crisis
Investment in rural land in the UK seeing weakening returns
A weakened investment performance suggests that confidence in the rural land market in the UK is cooling after years of great returns. The IPD UK annual rural property index shows that total return recorded in 2015 was 5.5%, down from the 10.4% recorded in 2014. It is the most subdued return since 2008 and reflected a market cooling after several years of very robust returns in line with other investment classes. Sentiment was tempered by weakening commodity prices, and more recently by political discussions around Britain exiting the European Union. The report says that this caution around future market uncertainty was most reflected in rural land capital growth, which slowed to 4.1% in 2015 from 8.9% in 2014. This marked the lowest growth since 2008 when values depreciated. The decrease in the rate of capital growth contributed the most to the decline in the total return. The restraint in capital value growth was most pronounced in South East, where growth declined to 5.8% from 17.9% in 2014. There was also significant moderation in capital value growth across Eastern England, East Midlands, and Yorkshire and Humberside regions. Northern England and Scotland recorded the slowest value growth at 1.1%. Rural income return, however, held relatively steady at 1.3% compared to 1.4% in 2014, the figures in the annual index also show. ‘The weakened investment performance suggests confidence in the land market is cooling down after years of great returns,’ said Colm Lauder, MSCI vice president. ‘Moreover, the uncertainty created by discussion over Brexit and the potential effect of such a move on agri-food exports hit the confidence of farmers to increase rental holdings or invest further,’ he explained. He added that investors were concerned that it will be some time before there is a clear picture for the agricultural economy. MSCI also recorded a total return of 10.8% in 2015 in the IPD UK Annual Forestry Index, which marked a decline from a total return of 18.6% in 2014, the most subdued return since 2008. The index report points out that the decline is despite healthy demand for timber and wood products. However, a strengthened pound sterling versus euro and Scandinavian currencies put British wood products at a disadvantage in export markets. And it explains that British timber is heavily dependent on the exchange rate value of the pound. The significant gap between Euro and Swedish Krona denominated import prices and home grown prices denominated in the British pound narrowed significantly, which rendered Scandinavian exported sawn timber more competitive in 2015. Consequently, imports from mainland Europe rose at the expense of UK timber growers, whose timber sale returns in turn declined due to weakening saw-log prices. Subsequently the medium term run of forestry property price returns were impacted as investors and analysts made the adjustment. ‘The total return from UK Forestry of almost 11% is… Continue reading
Demand for rental properties in UK increased in first quarter of 2016
Despite attempts by the UK Government to dampen the buy to let market and stimulate home buying, the first quarter of 2016 saw demand for properties to rent continue to rise, new research shows. The number of landlords reporting tenant demand as either increasing slightly or significantly stood at 39%, up from 34% in the fourth quarter of 2015. A further 36% of landlords described tenant demand as being stable. According to the latest survey by BDRC Continental for Paragon Mortgages, the sector is also witnessing high levels of tenant satisfaction. Some 79% tenants surveyed said they are satisfied with their current landlord. The research also found that 85% of tenants consider their current rental property to be their home and 69% believe the level of rent they pay to be good or very good value for money. Reflecting the changing balance in housing tenure, the average length of time tenants are spending in their current properties now stands at nearly seven years. The average length of time spent in the Private Rented Sector (PRS) in total was reported to be nearly 13 years. Landlords also agree that the PRS plays an increasingly important role in housing the UK. With the social housing sector having lost around one million homes since 1991, some 78% of landlords polled agreed the PRS compensates to some extent for the decline of the social housing sector. An overwhelming majority, 89%, of landlords also stated the PRS has an important role to play in accommodating those who are priced out of home ownership, while 74% agreed the PRS plays a role in accommodating those excluded from social housing by dwindling supply. ‘The rise of the PRS and the decline of the social housing sector have been the predominant trends in the UK’s changing housing tenure over the last 20 years. This data gives an interesting insight into how both tenants and landlords perceive these trends,’ said John Heron, director of mortgages at Paragon. ‘It’s good to see tenant satisfaction at such high levels. The sector often suffers from negative PR and the good work done by the vast majority of landlords to provide homes for those who cannot or do not want to buy goes unremarked,’ he explained. ‘This survey clearly demonstrates that the PRS is increasingly providing longer term solutions in housing and that responsible and professional landlords are supporting the provision of housing to those that rely on the PRS for their home,’ he added. Continue reading
EU referendum causing uncertainty in UK property market with prices set to fall
Increasing uncertainty is weighing on the UK residential property market which could result in prices falling, according to the latest monthly housing report from the Royal Institution of Chartered Surveyors. The report paves out a scenario where prices could experience a short term drop due to uncertainty surrounding the referendum later this month on the future of the UK in the European Union. It would be the first such fall since 2012. The most recent polls are putting the Leave campaign marginally ahead of the Remain campaign and in many areas of business and economic life in the UK this is causing a wait and see attitude. This is already affecting the property market according to the RICS report which says that prices across the UK saw only modest growth in May while prices in central London fell. On top of this demand from buyers is falling at the fastest rate in eight years. RICS predicts that house prices nationally are set to dip over the coming months, while rents increase while in central London some 35% more property professionals are reporting that prices had fallen rather than risen over the past month. While prices are continuing to climb modestly across the rest of the UK, this trend looks set to fade, with 10% more respondents predicting that prices would fall rather than rise over the coming three months. This is the first time that a fall in prices has been predicted since 2012. London and East Anglia are expected to be worst hit with 43% and 33% of respondents saying that prices will fall over the next quarter. ‘Sadly, for the many young people looking to enter the property market, it is unlikely that we are seeing the emergence of a more affordable market. Instead, it appears to me that what we are looking at is a short term drop caused by the uncertainty resulting from the forthcoming EU referendum coupled by a slowdown following the rush to get into the market ahead of the tax change on the purchase of investment properties,’ said Simon Rubinsohn, RICS chief economist. ‘Certainly, that’s the story we are hearing from our members. There is not at this point a sense that a fundamental shift is taking place in the market,’ he added. Buyer demand fell across the UK for the second consecutive month and at the fastest pace since 2008, with 33% more property professionals saying that demand decreased last month. The survey revealed that in the longer term, while house prices are thought likely to regain momentum, rents look set to outpace them, with UK rents predicted to increase by 4.7% year on year for the next five years, compared to house price increases of 4.1%. The number of agreed sales also fell for the second consecutive month with a net balance of 22% of respondents reporting a fall rather than a rise in activity. However, Thomas van Straubenzee of prime London property agents VanHan, believes that… Continue reading
