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US commercial real estate recovery lags behind residential, say agents
The US commercial real estate market still faces its share of challenges but property agents specialising in the sector are confident that marked improvement seen over the last year will continue. At a commercial economic issues and trends forum National Association of Realtors chief economist Lawrence Yun led a panel discussion about the forces shaping commercial real estate markets. The panellists agreed that the market has improved and expressed confidence that continued recovery in the economy will drive commercial real estate growth. ‘Commercial real estate usually recovers two years behind the economy. However, NAR members who practice commercial real estate are seeing a three to four year wait. It has been a long and slow recovery, but it is happening,’ said Yun. The forum heard that there are still headwinds facing the commercial sector. Subpar Gross Domestic Product growth, stagnating wage growth and low employment rates are all affecting demand for commercial properties. Yun explained that improving those underlying fundamentals is instrumental in maintaining a strong commercial market and another major hurdle facing the recovery is the lack of financing available for small investors. While large companies can access financing from Wall Street or international buyers, most financing for smaller investors still comes from regional or local banks and credit unions. Many of those small banks are hesitant or reluctant to give out commercial loans. ‘New financial regulations for all banks, big and small, are resulting in smaller banks bearing proportionally higher compliance costs. The little guys are taking the brunt of this. Maybe there should be waivers for smaller banks so they can give out the loans businesses need and help with community development,’ Yun added. According to Sam Chandan, founder and chief economist of Chandan Economics and associate faculty member at The Wharton School of the University of Pennsylvania, when it comes to multifamily homes Millennials love to rent. They prefer the flexibility and proximity to amenities that comes with renting rather than owning. However, that fails to take into account that while Millennials will always be Millennials, Millennials will not always be in their twenties. You could ask a 22 year old at any point in history if they want to own a house in the suburbs, move away from urban centres, or own a minivan and they will say no. But that answer has changed in the past and it will change again, and the multifamily sector needs to develop a narrative that takes that into account,’ he explained. The same problem is affecting other commercial markets, such as retail. Online commerce has changed the way commercial retail positions itself and attracts buyers. ‘While it’s true that you will never be able to get a haircut online, the same cannot be said for buying books or groceries. We cannot assume that because people always shopped at grocery stores that they will not learn and adopt another way,’ said Chandan. ‘The commercial market needs to develop a narrative that evaluates how… Continue reading
Annual UK house price growth puts on a spurt, especially in Scotland
UK house price growth is increasing again with the latest figures from the Office of National Statistics showing an annual rise of 9.6% in the year to March 2015. This is up from annual growth of 7.4% in the year to February 2015 and some parts of the country have seen record increases. House price annual inflation was 9.4% in England, 5.7% in Wales, 14.6% in Scotland and 7.5% in Northern Ireland. This is the highest annual increase in Scotland since July 2007. Annual house price increases in England were driven by an annual increase in the East of 11.4%, London 11.2% and the South East 11.2%. Excluding London and the South East, UK house prices increased by 8.1% in the 12 months to March 2015. On a seasonally adjusted basis, average house prices increased by 1.1% between February and March 2015 and prices paid by first time buyers were 7.8% higher on average than in March 2014. For existing owners prices increased by 10.3% for the same period. But there are concerns that house price growth is so strong. ‘House prices are going up four times faster than people’s wages. No wonder mortgage approvals are falling and first time buyers are struggling to save a large enough deposit. And we all know that housing bubbles burst and cause economic chaos,’ said Frances O’Grady, general secretary of the Trades Union Council. ‘There is no sign the government yet understands the challenge of ending the housing crisis. Their headline policy is an incredibly unpopular plan to sell off social housing to the private market. This would reduce the supply of affordable homes when we should be adding to them as quickly as possible,’ added O’Grady. Peter Rollings, chief executive officer of Marsh & Parsons, pointed out that it is worth bearing in mind that these figures concentrate on March. ‘The country was still convinced that we had a close-run election on our hands and vendors and buyers in London were holding their breath about what impact mansion tax and other possible policies might have,’ he said. ‘Now the reality is far different, a frisson of excitement has returned to the high-end market,’ he added. Continue reading
Home owners in Scotland’s Shetland Isles see top value growth since 2009
Home owners in the Shetland Isles in the far north of Scotland have seen the value of their property increase by £39,311 or 31% since the trough of the last housing market cycle in 2009, new research shows. The situation has been helped by the islands having the highest employment rate in Scotland, according to the research by the Bank of Scotland. Aberdeen City has the second highest house price increase in Scotland since 2009, with property prices going up 21% or £38,275, followed by Aberdeenshire with a 16% increase of £33,022. The report notes that both are amongst the five areas in Scotland with the highest levels of employment over recent years and says that there is a clear link between levels of employment and house price performance in recent years. Those areas with the highest average levels of employment since 2009 have, on average, recorded bigger house price gains. For example, the five local authority districts (LADs) with the highest employment have experienced average house price rises of 14% or £23,462, since 2009, compared with an increase of 2% for Scotland as a whole. The average house price in the 10 LADs that recorded the highest employment rate between 2009 and 2015 rose by £9,554 or 6%. However, looking further afield to the top 20 LADs, they have seen an average increase of only 2% or £2,617, which is in line with the average for Scotland. In stark contrast, those areas with the highest levels of unemployment, as measured by the claimant count, have typically underperformed the Scottish average. The 20 areas with the highest levels of unemployment have recorded an average house price fall of 8% or £11,252. The five areas with the highest unemployment rate have seen a 7% drop in the value of their homes. ‘There has been a very clear relationship between conditions in the Scottish jobs market and house price performance during the period since the housing market downturn between 2007 and 2009. Those areas with high levels of employment have tended to record above average house price growth. Areas with high unemployment levels have, on the other hand, typically underperformed,’ said Nitesh Patel, economist at the Bank of Scotland. ‘The past few years have underlined the importance of local economic health in determining house price behaviour. Other factors, however, are also key drivers of house price trends including the strength, or otherwise, of housing supply,’ added Patel. Continue reading
