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Wealthy Chinese and Russian buyers return to top end London homes market
A lowering of asking prices at the top end of the London property market seems to have led to an increase in sales of home in the £10 million plus range. Between January and October this year, the number of such properties sold by international agent Knight Frank increased by a third compared to the same period last year and was 92% higher than in 2012. This comes at a time when there is speculation over the sustainability of price growth in prime central London and the prospect of a mansion tax after next May’s general election, which have both resulted in more subdued demand. However, a large contributing factor is that vendors, who are typically discretionary sellers, have lowered their asking prices by between 5% and 10% in order to achieve a sale, according to the firm. ‘Once buyers re-priced at a more realistic level and the gap between the expectations of the vendor and the buyer closed, it triggered a flurry of activity,’ said Tim Wright of Knight Frank’s Prime Central London team. In June and July this year, Knight Frank sold as many £10 million plus properties as during the previous four months combined. ‘There has been talk of a drop in the number of transactions in the market and a slowing of price growth but this is due to the lack of data in the public domain,’ said Richard Cutt of Knight Frank’s Prime Central London team. ‘In the last quarter there have been a large number of flats bought from plan, off market, which have moved prices up and in some cases quite significantly. These sales only become public on completion and would paint a different picture of the market if they were factored in today. An example of this is the success of British Land’s Clarges Mayfair development,’ he added. The higher number of transactions is also underpinned by strengthening demand in recent months, with Russian buyers re-emerging after a period of uncertainty and Chinese buyers increasingly active in the £10 million plus price bracket. ‘The Russians are back. After a period of uncertainty and instability, they appear to have more clarity on where they stand, which has given them the confidence to get back into the market,’ said Wright. In the six months to October, Russian buyers accounted for 21% of super prime sales compared to 13% over the preceding six month period. However, given the economic backdrop in Russia, there is a marked difference between those that hold assets in roubles and those in US dollars, which is curbing the buying power of some. This year also saw mainland Chinese buyers become active in the super-prime market for the first time, accounting for 3% of sales after negligible demand in previous years. ‘We are beginning to see some serious interest from ultra-high net worth mainland Chinese buyers. Interestingly, it seems to be houses rather than flats or investment properties. These are buyers who clearly intend to spend time living in London… Continue reading
UK house prices to rise between 3% and 5% next year, it is predicted
A further moderation in house price growth in the UK is likely next year and house prices nationally are expected to increase in a range of 3% to 5% in 2015. The prospect of higher interest rates at some point in the year and the deterioration in affordability over the past year are expected to be key factors curbing housing demand, according to the latest house price inflation report from the Halifax. But housing demand should be supported by solid economic growth, higher employment, still low mortgage rates and the first gain in ‘real’ earnings for several years, the report suggests. Halifax said it expects to see a more even regional pattern in house price growth during 2015. Global economic worries could reduce demand and activity at the top end of the London market in 2015. Further ahead, price growth is expected to rise broadly in line with income growth, as rising interest rates increase the affordability constraint on the market. Higher levels of house building should also limit upward house price pressure. ‘The fortunes of the housing market are closely tied to developments in the wider economy. The strengthening in the UK economy has contributed to higher housing demand over the past 18 to 24 months. There has been an increase in the number of buyers, fuelled by rising confidence and the improved cost and availability of credit. Higher demand, however, has not been matched by an increase in the number of sellers in the market, resulting in strong upward pressure on house prices in some parts of the UK,’ said Halifax’s housing economist, Martin Ellis. ‘The deterioration in housing affordability as a result of higher house prices, earnings growth that has been consistently below consumer price inflation until very recently and increased talk of an interest rate rise, appear to have combined to temper housing demand since the summer. Tighter mortgage rules may also have acted as a brake on activity. The weakening in housing demand has led to a modest easing in both price growth and sales,’ he explained. He pointed out that house prices in the three months to October were 0.8% higher than in the preceding three months. This was the third consecutive decline in the quarterly rate of increase and the smallest rise since December 2012. Annual price growth in the three months to October slowed to 8.8% from 9.6% in September. Activity has also declined with mortgage approvals in September falling for the third successive month to a 14 month low, whilst home sales are at their lowest level since October 2013. ‘There has been a slight easing in economic momentum during the second half of 2014, mainly reflecting global economic developments, particularly the slowdown in the euro zone. Despite slowing moderately, the pace of growth remains robust. Moreover, the UK economy has moved from a period of prolonged stagnation to growth at, or above, its long run trend over the past 18 months or so. Overall, UK economic activity is… Continue reading
Saudi Arabia set to see continued growth of its residential real estate market
Saudi Arabia has seen its residential property market expand rapidly over the last year due to increased demand caused by various government initiatives to boost the housing sector. Over the past year, residential prices in Riyadh have risen by 5% to 7% overall, according to the Riyadh residential research report from international real estate firm Knight Frank. However, it points out that there have been variable performances across the capital’s districts, with congestion issues in the south, for example, responsible for prices stagnating. Meanwhile, in the north, which has seen notable development activity, prices have seen a healthy uplift of around 9%, the report says. In the short to medium term, with new supply unlikely to be able to fully offset pent-up demand, the firm expects residential prices to continue to move in an upward direction. In recent years, Saudi Arabia’s residential construction sector has been expanding rapidly. Indeed, the latest available data from the Saudi Arabian Monetary Agency shows that the value of residential building construction across the kingdom rose for the ninth consecutive year in 2012, increasing by 11.4% year on year. Riyadh is an important driver of construction activity in Saudi Arabia and the capital city accounted for an average of 27% of all residential and commercial permits issued across the Kingdom between 2003 and 2013. Moreover, the number of permits issued in the capital rose by 319% over the 10 year period, outperforming Saudi Arabia as a whole, which experienced a 215% increase. The report points out that despite rising development activity demand for residential units continues to outstrip supply in Riyadh. Indeed, the capital has a requirement for around 50,000 housing units per annum over the next five years and has an estimated housing inventory of just 1.15 million units. However, due to construction delays and the lack of available land, developers have found it increasingly difficult to bridge the gap between supply and demand. What’s more, although there are a number of large housing schemes planned to be completed in the short term, there is unlikely to be enough capacity in the system to deliver the required number of units to satiate current levels of pent up demand. Figures from the Central Department of Statistics and Information (CDSI) show that just 60% of housing units in Saudi Arabia are owner occupied and in Riyadh this drops to 53%. By comparison, the levels of owner occupation in neighbouring countries is much higher at 75% in the United Arab Emirates, 80% in Qatar, 82% in Bahrain and 83% in Oman. The report explains that in order to address the housing undersupply issue, the government has launched a number of projects in recent years although not all of these have achieved the success that had been envisioned. For example, in 2011, the government announced a programme of works to build 500,000 homes across the kingdom.’ However, the scheme struggled to gain traction due to issues related to a lack of land availability, complexities in allocating aid and slow moving… Continue reading
