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Prime properties in commuter areas set to outperform London prices
Prime commuter housing markets are set to outperform prime London in the five years to 2020, according to new research from international real estate advisor Savills. Overall the relative value offered compared to the capital is likely to underpin medium-term house price growth, the five year UK prime housing market report says. However, short term growth prospects are likely to be hampered by the combined impact of stamp duty, mortgage market review and a slow prime London market. The price gap between property in London and its commuter belt indicates the potential for significant growth once the ripple effect is restored, it explains. Prime London property prices are 36.8% above their 2007 levels, compared to a 6.6% rise in commuter areas over the same period. Consequently, the prime housing markets in London suburbs, inner commuter, up to 30 minutes train journey to London, and outer commuter up to 60 minutes, locations have the strongest growth prospects over the five years to 2020, at 24.5%, 24% and 23.4% respectively. However, the report explains that these prime housing markets in the commuter zone markets are dependent on movement in the prime London housing markets, which is only expected to occur after they acclimatise to a new tax and regulatory environment, allowing the fundamentals of wealth generation, both domestic and global, to translate into restored demand. This is expected to start to take effect in 2017, with trend rates of price growth returning from 2018 onwards to deliver five year price growth of 21.5% in prime central London and 18.2% growth in other prime London markets. Across the rest of the country prime housing markets are expected to be driven by a preference for city and town locations and strengthening local economies. Scotland is seeing a similar predilection for metropolitan areas, but all markets over £750,000 are being constrained by Land and Buildings Transaction Tax to some degree. ‘We expect the trend for urban living to continue as London buyers seek out vibrant locations where they don’t have to sacrifice the convenience of living close to shops, restaurants and leisure facilities,’ said Sophie Chick, Savills research associate director. ‘Positive sentiment for cities in the north of England is also being bolstered by talk of a northern powerhouse, despite the proposals being some way off,’ she explained. ‘While the prime property market is continuing to adjust to a new fiscal and regulatory environment, wages are increasing, interest rates are still low and there is political certainty for the next five years. Under these circumstances, we expect prime property to return to long term trend rates of real price growth in 2018,’ she added. Continue reading
City of London office market sees strongest recovery on record
Rents for City of London offices have proved more resilient in recent years than during previous market downturns and recoveries, according to new research. The analysis from real estate firm Knight Franks indexed City of London office rents at 100 for the pre-downturn peaks recorded in the fourth quarter of 1989, the third quarter of 2001, and the fourth quarter of 2007. This showed that rents in the most recent downturn found a floor and moved into recovery far sooner than during the early 1990s and early 2000s downturns and overall the City office market has seen its strongest recovery on record. Also, the current recovery is proving to be far more enduring than that seen after the early 2000s downturn. Indeed that market cycle lasted just six years, with the arrival of the global financial crisis in late 2007, the report points out. It also explains that the outlook is good as it is over seven years on from the market peak for rents, and growth is still occurring, and expected to continue. ‘These figures demonstrate that the City office market has proved far more resilient in recent years than anyone would have imagined back in 2007 when the financial crisis began,’ said Bradley Baker, central London tenant representation partner at Knight Frank. ‘One of the keys to the City’s success has been its’ significant diversification away from an over-dependence on the financial sector in the past and instead embracing and attracting technology and media firms such as Saatchi & Saatchi, Amazon, Hachette and Uber,’ he explained. ‘Unlike previous downturns, the current recovery began within two years of the initial crash and has been sustained for over five years. This compares favourably to the 2001/2003 and 1989/1991 crashes which took over three and four years respectively to post a recovery, and even then they were short lived,’ he added. Continue reading
New research reveals the rapid growth of the private rented sector in the UK
Over two million homes have changed tenure in the last decade when taking into account all property sales between owner occupiers and landlords, according to new research. Some 1,550,000 properties have gone from being lived in by their owner to being lived in by a tenant, while 550,000 have moved the other way, from the private rented sector into owner occupation. This has resulted in an extra million homes being occupied by a tenant rather than a home owner, equivalent to the number of households in the North East of England, says the research from property group Countrywide plc. Homes transferring from owner occupation into the private rented sector accounted for half of the growth in the number of privately rented homes over the same period. Most of the remaining growth in the private rented sector has come from landlords buying new build homes. The research also found that some 700,000 new homes built since 2005 have found their way into the private rented sector. The remaining homes changing tenure have come from social housing and residential conversions. Despite this, homes are only around half as likely to change tenure as people. First time buyers end up buying 65% of the homes that leave the private rented sector, and last year 45,000 first time buyers bought their home from a landlord, the highest number since the market downturn in 2008. This equates to 15% of all those who got onto the housing ladder for the first time. With first time buyers and landlords tending to look for homes which are smaller and cheaper than average, they often find themselves in competition. As a result, both groups are disproportionately likely to sell homes to one another. The research explains that given the private rented sector is largest in London and the South East, this is where first time buyers are mostly likely to buy their home from a landlord. One in five new buyers in London, and one in six in the South East, bought a home which had previously been rented out. It is in these two regions where the difference between what new buyers paid when buying from a landlord and those that didn’t is greatest. Those buying from a landlord paid on average 8% less than those that didn’t. ‘The rapid growth of the private rented sector has to come from somewhere, while the tenure may change, the physical home remains,’ said Johnny Morris, director of research at Countrywide. ‘The sector has been growing since 2005 but the number of home owners has fallen in each of the last 10 years. This scale of shift in tenure shows that the current push from the government to increase the number of homeowners is unlikely to be enough to reverse the decline,’ he explained. ‘Although landlords and first time buyers might not appear natural bedfellows, because they tend to look for similar types of homes they do end up selling to each… Continue reading
