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Economic performance drives UK property markets, not elections
The upcoming general election in the UK has so far had a minimal impact on the country’s property markets as the economy is the more significant driver, it is claimed. Periods of strong economic growth coincide with strong office take-up and the correlation between property related decisions and timing of general elections is negligible, according to a new report by commercial property and real estate services advisor CBRE. ‘Conventional wisdom suggests that property markets slow as a general election approaches. Elections are uncertain, with the forthcoming election more uncertain than most,’ said Miles Gibson, head of UK research at CBRE. ‘However, the data shows that the property market is actually very resilient in the run-up to an election, with little observable change to the overall behaviour of the market, except where a detailed policy has already been proposed, such as the mansion tax,’ he explained. ‘There is little, if any, evidence of UK general elections having any overall impact on property investors or occupiers, the pace of planning decisions, or house prices. This may be because Party manifesto policies on property are typically very general and, where they are specific, they take time to be implemented,’ he added. Using data from the past 30 years, the report says there is little evidence to suggest that general elections cause a slowdown in the central London office investment market. In the last 30 years, there have been six general elections, all of which took place in the second quarter of the year. Second quarters tend to be quieter than the quarterly average. This holds true for non-general election years as well as general election years. However, there were year on year increases in investment transactions observed in five out of the six general election quarters in the period suggesting that the traditional weakness of second quarters is due to seasonal factors unrelated to the occurrence of general elections. The report points out that the central London investment market is very strong at present. With latent demand undoubtedly robust, the strength of the market in the first half of 2015 will be driven by the availability of stock rather than the election outcome. As evidence, it says that commercial occupiers in central London seem undeterred by the forthcoming general election as evidenced by the 15 million square feet leased during 2014, the highest annual total since 2006. It also says that against a backdrop of robust economic and strong office based employment growth, demand for office space will not diminish because of an impending election. This is already reflected in an above average level of space under offer and a high level of active requirements, suggesting that 2015 will be yet another good year for leasing activity. The report also argues that there is no discernible negative impact at a national level in the residential sector on either the mortgage market… Continue reading
UK landlords report lowest void periods in 2014
The average void period experienced by UK landlords fell in 2014 with the lowest recorded in the fourth quarter of the year, down to 2.6 weeks, the latest sector survey shows. This was down from 2.8 weeks in the fourth quarter of 2013 and void periods have now not risen beyond 3.5 weeks over the past 13 years, according to the quarterly survey from specialist buy to let lender Paragon Mortgages. The first quarter of the year saw the average void period remain at 2.8 weeks then it dropped slightly to 2.7 weeks in the second quarter and returned to 2.8 weeks in the third quarter before falling again in the final three months of the year. Void periods have remained low over the period of the survey, averaging between 2.6 and 3 weeks since 2001. The lowest recorded void period was 2.5 weeks in the fourth quarter of 2002, and the highest at 3.5 weeks in the second quarter of 2010, which was during the peak of the financial crisis. ‘Although void periods have fluctuated slightly over the past year they have continued to remain low, peaking at 2.8 weeks,’ said John Heron, managing director of Paragon Mortgages. ‘It is encouraging to see that in the fourth quarter of 2014 void periods reduced to the lowest point recorded since 2012, only slightly above the lowest average void period reported by our research at 2.5 weeks,’ he pointed out. ‘The low average void periods we have seen over the past year, and in previous years, reflects the strong and growing demand we have seen for private rented property together with effective property management by landlords and letting agents in renting out properties,’ he added. ‘This is positive news for landlords and, as tenant demand continues to rise, it is possible that void periods may decrease even further in 2015,’ he concluded. Continue reading
Recovering European real estate markets set to be magnet for investors in 2015
Berlin is expected to be the top European real estate investment market in 2015, followed by Dublin, Madrid, Hamburg and Athens. Recovering markets like Dublin, Madrid and Athens which were hit by the economic downturn are regarded as being fertile grounds for property investors, according to the latest annual emerging trends report from the Urban Land Institute and PwC. The report points out that competition for prime assets in Europe’s major real estate markets is leading property investors to continue their move into secondary assets and recovering markets. It highlights a surge in popularity for real estate investment opportunities in a number of cities that were hit particularly hard during the last market downturn, with dramatic rises in this year’s city rankings for Madrid, up 16 position, Athens up 23 positions, Birmingham up 14 positions, Amsterdam up 17 positions and Lisbon up 17 positions. Berlin has moved up the rankings from last year, knocking Munich off the top spot for investment prospects in 2015. Historically dominated by domestic buyers, Berlin’s investment climate has now changed as international investors pour capital into the city, the report says. The city is described as a hotspot for media and technology and its young population has helped boost the investment appeal of its residential sector. Ranked again in second place, Dublin has had another strong year in which investors have jostled for opportunities. There was strong rental growth based on low supply, employment growth and an improving economy. Office rents and values are recovering strongly but still have some way to go before they reach their pre-crisis peak. Madrid has shot up the rankings for investment prospects and many overseas investors are targeting the city. But whether Spain offers solid, long term business prospects is hotly debated among opportunistic investors, the report points out. Hamburg has slipped by one place this year, but this is mainly due to investors looking to smaller, less established markets rather than any real decline in the city’s fundamentals, the report explains. International investors are flooding into Hamburg, accounting for half of the €2.4 billion of deals in the first three quarters of 2014. Its growing population means the residential sector is thriving. Athens is the biggest mover on the list this year, up 23 places to number five. In recent Emerging Trends surveys, investors have indicated a willingness to enter other distressed markets such as Spain, Ireland and Italy, but Greece is starting to gain attention, the report says. Although Europe’s hardest hit economy remains fragile, a few trail blazing investors are moving in to take advantage of pre-rebound opportunities. The report finds that in spite of economic uncertainties in Europe, property remains fertile ground for investors. Some 70% of investors expect more equity and debt will flow into their markets this year in a quest for the best real estate. The biggest problem investors are anticipating is a shortage of assets, ahead… Continue reading
