Tag Archives: crisis
Annual property rental values in prime central London fell last month
Annual rental value growth in the prime central London residential property market eased to 0.7% in December on the back of falling demand in the financial services sector. Rental values fell 0.4% from November, taking the annual rate of growth to its lowest level since July 2014, according to the latest analysis report from real estate firm Knight Frank. However, Tom Bill, head of London residential research at Knight Frank, explained that there is also an element of seasonality and a quarterly drop of 1.1% in the last three months of the year was the weakest since December 2014 and repeats a pattern of previous years. Rental value growth peaked in May this year at 4.2% and the subsequent decline has resulted in prime gross rental yields dipping from 2.96% to 2.93% over the same period, the report says and demand has fallen over the last six months as a number of banks have implemented restructuring plans. ‘European banks in particular have been slower to cut jobs than their US counterparts following the financial crisis. Profitability has fallen due to new regulations that force banks to hold more capital, which has contributed to job cuts at European banks that have been in excess of 100,000 in recent months,’ said Bill. ‘As well as the macroeconomic backdrop, including uncertainty over China and falling commodity prices, the situation is compounded by the fact many large European banks have new chief executives, who typically take a more radical approach to cost savings in the early stages of their tenure,’ he pointed out. ‘The result is that optimism at financial services companies fell markedly in the third quarter of this year across a range of sectors. However, there have been signs of stronger demand from boutique financial services companies like private equity businesses and hedge funds as clarity emerges surrounding the level of 2016 bonus packages,’ he added. The report also says that demand at the super prime level of £5,000 plus per week remains strong as uncertainty continues to surround taxation and price growth in the higher price brackets of the sales market. ‘Equally, demand remains strong in lower price brackets among workers of all professions, bolstered by the strength of the UK’s economic recovery,’ Bill said. Continue reading
UK experiencing a crisis in supply of homes for sale
There are 10 buyers for each property for sale in the UK as the supply of homes on the market has fallen again, reaching crisis level according to estate agents. At the same time sales to first time buyers fell in November even although the number of house hunters increased, the latest monthly report from the National Association of Estate Agent (NAEA) shows. After a promising period from July to October in which the number of sales made to first time buyers grew, in November, the percentage of sales made to the group fell by 10%, it also shows. Sales as a whole were down by 1% and while this is typical of this time of year sales to first time buyers are down dramatically and estate agents believe it will only get worse. The Chancellor George Osborne outlined plans to help first time buyers get on the housing ladder during his Autumn Statement but over half, 53%, of NAEA members think the group will continue to feel squeezed out of the market, due to the lack of affordable housing. The lack of supply and growing demand for housing continued to drive the market in to the ground, as the number of house hunters grew by 20% and available stock fell. In October, there were 336 house-hunters on average registered per branch, rising to 403 in November. The report also points out that available housing decreased marginally in November, from 43 properties managed per branch last month, to 41 this month meaning there are now 10 prospective buyers battling it out for each property. ‘It’s very normal at this time of year that demand is high and supply is low. House hunters hoping to find their dream property in the New Year have registered interest with agents, whilst those hoping to sell are holding off putting their properties on the market before January. However, supply is outweighing demand so heavily now that it can’t solely be attributed to seasonality,’ said Mark Hayward, NAEA managing director. ‘It’s clear that we’re faced with a crisis here and the housing market needs addressing as a matter of urgency. Our recent Housing 2025 report compiled with Association of Residential Letting Agents (ARLA) and Centre for Economics and Business Research (Cebr) found that by 2025, house prices are set to rise by 50% – and if we don’t act now, this will impact first time buyers, second steppers and last steppers, forcing many out of home ownership,’ he explained. ‘The Government has made efforts to address the issue of supply and demand, with Osborne outlining plans to build 200,000 new starter homes in his Autumn Statement, but four fifths of our agents think it simply isn’t enough. It’s all very well planning to build houses, but we need to move to action and get and the bricks and mortar on the ground, if… Continue reading
Income producing potential of UK property set to top the agenda for investors in 2016
The income producing potential of various property asset classes is expected to be top of investors’ agendas in 2016, according to a new outlook analysis report. Average UK house prices are set to rise 5% in 2016, but the speed and timing of interest rate rises will dictate the pace and sustainability of price growth, according to the predictions from real estate advisors Savills. In the commercial market, average total returns on UK property investments are likely to slow to approximately 7.5% while in the agricultural market Savills has downgraded its forecasts for the next five years given recent market evidence and the short to medium term expectations for commodity prices and therefore farm profitability. The firm says that income and the ability to unlock the latent value of individual assets through active management are likely to be priorities, due to the current stage of the property cycle and the medium term prospect of interest rate rises, regulation and tax policy in the residential sector, and the outlook for commodity prices in the agricultural sector. In the commercial and residential markets Savills expects a shift towards investment in regional markets, given where recent capital growth has left yields. The referendum on membership of the European Union (EU) presents the greatest uncertainty for UK real estate in 2016/2017, according to Savills, as the outcome has potential implications for all three sectors. The prospects for a pre-referendum investment slowdown may well depend on how close polling companies believe the outcome will be, the report suggests. The report explains that annual house price growth stood at just 3.9% at the end of October, with annual housing transactions appearing to have peaked at 1.2 million per year so the forecast for 2016 is 5% for average UK house prices. It points out that stamp duty changes have left the top end of the London market looking both fully priced and fully taxed suggesting a further delay in the return to trend rates of house price growth. Meanwhile, the mainstream market is more dependent on what happens to the cost of borrowing. ‘Capacity exists for short term price growth if rate rises are delayed further, but rising interest rates will squeeze affordability, making house price growth dependent on earnings and the pace of economic growth,’ the report says. It adds that in some areas in London, for example Ealing, Acton, Greenwich, Lewisham and Waltham Forest, may buck this trend as they attract more affluent buyer groups. Attractive commuter towns will also continue to offer good medium term price growth, particularly where travel times are shortened by rail improvements. Also demand for private rented accommodation will continue to rise. The restriction in tax relief and additional 3% stamp duty charge for buy to let landlords may result in rising private rents and shift investor focus towards higher yielding sectors of the market, particularly key regional cities, it suggests. While Government policy… Continue reading
