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Supply increases in UK private residential rental sector
The number of available private rented properties in the UK increased in July but at the same time demand dipped, according to the latest monthly report from the Association of Residential Letting Agents (ARLA). Agents managed an average of 189 properties per branch in July, compared to 178 in June and demand across the UK decreased slightly with an average 35 prospective tenants registered per ARLA branch in July compared to 36 in June. The report says that whilst this may be a result of the quieter summer months it is a step in the right direction for balancing supply and demand in the sector. However, demand in London has continued to rise, with 40 prospective tenants registered per branch in July, compared to 36 per branch last month. Some 35% of ARLA agents expect the supply of rental properties to continue increasing over the next five years. The East of England is most optimistic, with over half of agents in the region, 53%, predicting supply will continue to rise. However, only 15% in the south West and 16% in Yorkshire and Humberside predict continuing growth of housing stock for tenants. The report also reveals that letting agents are continuing to see increases in the cost of renting for tenants, with 37% reporting rents had increased between June and July, the highest number since tracking began in January, when levels were at 27%. The report also found tenants in the West Midlands have been affected by rent increases the most, with 64% of agents reporting rents had increased in July shortly followed by the East of England where 53% of agents witnessed rent increases. In comparison, only 21% of tenants in the North West experienced a rise. ‘To finally see a rise in available rental properties is definitely a step in the right direction; although with demand remaining the same, we still have a long way to go in achieving a balanced and stable private rented sector,’ said David Cox, ARLA managing director. ‘Following the changes to pensions made in April, the fact that a third of agents are predicting supply will continue to increase over the next five years could be a result of people releasing equity from their pensions to invest in the buy to let market,’ he pointed out. ‘It’s clear from this month’s findings that the growing gap between supply and demand is an issue still rife in the capital; which doesn’t look to be improving any time soon. With the cost of renting continuing to rise month by month, it’s a worrying state of affairs for those hoping to save for their first house and just pushing the aspiration of owning a home further out of reach,’ he added. Continue reading
UK house prices up 0.3% but annual growth slows
UK house prices increased by 0.3% in August but annual growth has softened to 3.2% from 3.5%, according to the latest residential property index. The data from lender the Nationwide shows that the average price is now £195,279 and chief economist Robert Gardner said that the fall in the annual rate of growth is due to prices having increased at a particularly strong rate in August 2014. Nevertheless, the annual rate of price growth was the weakest since June 2013. ‘This month’s data provides further evidence that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%,’ explained Gardner. ‘However, survey evidence cautions that this trend may not be maintained unless construction activity accelerates. Surveyors reported the lowest ever number of properties on their books in July whilst new buyer enquiries picked up,’ he added. He pointed out that UK house prices have proved remarkably resilient in recent years, certainly compared with many other developed economies. For example, UK house prices didn’t fall as far during the financial crisis, and even where they declined by a similar magnitude, UK prices generally recovered their pre-crisis levels more quickly. Indeed, UK house prices are currently around 5% above their pre-crisis levels, while prices are still well below their pre-crisis peaks in Ireland, down 38%, Spain down 36% and the Netherlands down 18%. ‘Clearly house price trends are determined by a wide range of factors, but labour market developments are amongst the most important. The strength of the UK labour market in recent years is a key reason why house prices have recovered more quickly,’ said Gardner. ‘There is a strong correlation between employment and house price growth since the financial crisis across the major developed economies. House prices remain further below their pre-crisis peaks in countries where employment is also well below pre-crisis levels,’ he explained. ‘Supply side developments also play an important role in explaining the divergence in house price performance. The UK experienced a much smaller increase in building activity in the run up to the financial crisis. As a result, there was much less of an overhang of unsold properties to be worked off in recent years,’ he added. ‘However, with UK house building running well below the expected rate of household formation in recent years and with demand for homes rising, a significant increase in construction activity is required if affordability is not to become stretched in the years ahead,’ he concluded. According to Alex Gosling, chief executive officer of online estate agents House Simple, any hope that sellers were finally returning to the market seems to have been a vain one for the time being. ‘A boost to new stock levels in June suggested that we were finally starting to see some movement from sellers, but that momentum seems to have been short lived. The General Election, which the market hoped would provide a catalyst for sellers, is long gone and… Continue reading
UK regional office market sees demand increase
Occupier demand in the UK regional office market increased 51% in the first quarter of 2015 compared with the previous quarter, with total investment at its highest level since 2007. This growth totalled a combined take up of 2.08million square feet and 49% above the five year quarterly average, according to the latest data from real estate firm Knight Frank. Birmingham saw the top performance in the second quarter with take up of 521,136 square feet which was boosted by a number of large transactions, the most significant being the 212,000 square feet pre-let to HSBC at Arena Central. Pre-letting activity also increased in the second quarter of the year, impacting on new and grade A availability which is down by 17% year on year collectively to 2.2 million square feet. In the investment market some £2.09 billion of regional office assets changed hands in the first half of 2015, the sector’s strongest first half year since the second half of 2007. Bristol, Manchester and Birmingham were the main focus of investment activity, accounting for over half of total investment turnover. Bristol in particular saw some sizeable transactions, including the off market purchase of Templeback by Orchard Street Investment Management in June 2015 for £58.5 million, reflecting a net initial yield of 5.34% and Aviva Investors’ acquisition of 66 Queen Square for £32.7 million, at a net initial yield of 4.94%. ‘Improved occupier confidence has led to a surge in pre-letting activity and high levels of take-up across the main regional office markets in the second quarter,’ said Stephen Hodgson, head of regional offices at Knight Frank. The firm anticipates that this will be reflected in rental growth and further starts on new development schemes over the next 18 months. ‘On the investment front, despite the fact that yields are approaching historic lows we also feel that there is scope for further yield compression,’ added Hodgson. Continue reading
