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Madrid set to outperform other European office property markets
There has been good news for the residential market in Spain with sales steadily increasing and now the country’s commercial property market, particularly in Madrid, is striding ahead. Over the next couple of years, Madrid is forecast to be one of the best performing European office markets, after staging a strong recovery, according to the latest analysis from Knight Frank. This change reflects the much improved economic backdrop, providing occupiers and investors with renewed confidence and optimism. Historically, the Madrid office market has correlated closely with corporate performance and employment levels. Prime rents reached their floor in 2013 and increased by 14% in the first half of 2014, to currently stand at €28 per square meter per month. Office investment has risen sharply, with volumes amounting to €700 million in the first half of 2014, compared with €400 million for the whole of 2013. The report points out that there has been limited development over recent years, which has helped to stabilise the vacancy rate at 11.5%. With limited development in the pipeline, a shortage of good quality stock is expected in the medium term, which is expected to lead to further rental growth. An increasing number of companies are looking at relocating; having delayed their expansion plans throughout the recession which adds weight to the view that increasing demand will further boost take-up over the coming months. At a recent investor breakfast hosted by Knight Frank, a live opinion poll of the 200 attendees showed that Spain was year’s top target country for investment, chosen by 26% of the audience, knocking the UK off the top spot. Knight Frank says this is unsurprising given the strength of the rebound currently being seen in the Spanish market. However, the UK and Germany again featured strongly on investors’ radars, gaining 25.3% and 19.2% of votes respectively. ‘Overall office vacancy stands at 11.5%, however, Grade A supply in Madrid’s centre stands at just 2%. This, coupled with a 25% increase of take up year on year, will lead to significant rental growth in the capital,’ said Humphrey White, head of commercial, Knight Frank Madrid. ‘We are also seeing a polarisation of the office market as tenants become more demanding, leading to a flight to quality, the best within the CBD dramatically outperforming others in the immediate surroundings,’ he added. According to Darren Yates, global head of capital markets research, Knight Frank, as 2015 approaches, the combination of a more active occupier market, limited development pipeline and low rents offers a realistic prospect of strong rental growth. ‘In turn, this will further increase Madrid’s appeal to investors, leading to yield compression and enhanced growth in capital values. The investment case for Spanish property is compelling,’ he said. Continue reading
Second steppers finding it hard financially to move up housing ladder
Second Steppers in the UK need to find an extra £58,400 to fund the move to their second home, over double the average first time buyer deposit, according to new research. This gap is around £15,000 bigger than in 2013 and £18,000 bigger than in 2012, the fourth annual second steppers report from Lloyds Banks shows. Almost half, 46%, say the costs and fees associated with moving house is the biggest barrier to moving up the ladder. However, 40% of second steppers think it will be easier to sell this year, almost double the figure of 2013 and treble that of 2012. The report points out that growing house prices mean there is an ever widening gap for those making the move to the second step on the housing ladder. Yet despite this, many have increased confidence in the housing market and as a result, more confidence in being able to make the jump to the next step. Second steppers are the link between first time buyers and the rest of the housing ladder. They are living in the homes that the first time buyers need to buy to keep the market moving. Without movement from second steppers, movement on the ladder comes to a standstill on the second rung. Despite increasing house prices boosting equity levels for second steppers, the findings show people living in their first home have to find an extra £58,400 to plug the gap between the sale price of their current property and the cost of the house they would ideally move to. This figure is over double the amount of the average first time buyer deposit of £25,848, meaning it is far more expensive to move up the ladder than to get on it in the first place. Year on year, this figure has significantly increased. Nationally, the figure of £58,400 has risen by £14,900 since 2013 and £17,900 in 2012, when the figure was £40,500. However, across the country, there are significant regional variations in the perceived size of this gap. In the West Midlands, people will need to find just £21,000 extra to make the step to their desired second home. At the other end of the scale, people in East Anglia say they need £80,800 to make the jump. The report also points out that despite the growing financial gap between first and second properties, confidence in the market is improving. Just a quarter of second steppers see economic uncertainty as a key challenge, reducing by 10% in a year. Unsurprisingly, the number seeing negative equity as a challenge also reduced by 11 percentage points to just 14% of respondents. The Help to Buy Mortgage Guarantee scheme has had an impact on the mortgage market, with Treasury data showing that 79% of purchases with a mortgage guarantee were completed by first time buyers. This has contributed to second steppers being more confident that there is the demand coming through allowing them to sell. Just 29% see a lack of first time… Continue reading
Average house prices in the UK fell by 1.1% last month, the latest data shows
Average house prices in the UK fell 1.1% in September but are still up 6.9% on an annual basis, according to the latest index figures to be published. During the month average house price stabilised at £203,135, but in London property prices fell 3.3% but are still up 19.8% year in year taking the average price in the capital to £507,967. The National Housing Market Monitor report from haart estate agents says that the market remains strong with almost 10 buyers chasing each new property instruction across the UK, up from eight two years ago. In London there are 16 potential buyers chasing each property instruction. The difference between the London market and the UK as a whole is also marked with it comes to new properties being put up for sale. They have increased annually across the UK by 2.8% but in London by 23.1%. The report from the independent agent which has a network of 200 branches across the country, also shows that the average property price for first time buyers has reached two year high at £160,218, up 4.1% on a monthly basis and 8.2% annually. ‘Although our data shows a small slowdown in house price growth on a monthly basis, this must be taken in the wider market context. Good mortgage deals are still very much on the table and interest rates aren’t going up for the foreseeable future,’ said Paul Smith, chief executive officer of haart. ‘We have 10 buyers chasing every new property instruction UK wide so sellers shouldn’t be concerned. They should be reassured that the UK property market is still performing well,’ he added. New properties for sale across the UK in September increased 2.8% annually but fell on the month. This is the fourth consecutive month in which property supply has increased on an annual basis. In contrast the number of new buyers is down 6.6% annually, again the fourth consecutive month in which the level of demand has fallen on an annual basis. Similar to new buyer registrations, the number of first time buyer registrations decreased 6.4% annually and 2.8% on the month. However first time buyers now make up a higher percentage of all mortgages written, 44.7% in September 2014, up from 41.1% last year. The average mortgage achieved by first time buyers is also up and now stands at £125,668, an increase of 11.1% annually and 3.9% on the month. Continue reading
