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Residential property market in Abu Dhabi slow in first quarter of 2016
In Abu Dhabi real there was a slight decrease in demand for higher priced residential units but sales activity was slow although relatively stable except for a handful of transactions concluding at below market rates. A fee of 3% on home rentals was announced as a Municipality Contract Fee, which will be applied to all Abu Dhabi’s expat residents and this could affect the market, according to the latest UAE property review from Asteco. Rental rates for prime and high quality residential apartments fell 2% compared to the fourth quarter of 2015, the report data shows. However, apartment rental rates remained, on average, 4% higher than the previous year’s rates. Mid and low quality units, in contrast, recorded stable rates with only a slight decrease for larger units, as tenants moved to newer developments offering similar or lower rental rates. Similar to the apartment sector, rental rates in the villa market were relatively stable in the first three months of 2016. However, there was a slight decrease in demand for the higher priced but older villas that are predominantly located on Abu Dhabi Island. In comparison, the majority of newer prime and high end villa developments, which include the Saadiyat Island projects, Golf Gardens, and Al Raha Beach, recorded their highest rental rates. The report suggests that a lack of quality villa communities continued to be the main factor behind the high rental rates throughout Abu Dhabi. Over the last 12 months, the prime and high quality villa projects recorded between 4% and 7% rental increases, while those for lower quality private villas decreased by more than 10% over the same period. A breakdown of the figures show that price movement varied with rates down by 5% to 7 % over the quarter in Reem Island communities whereas Saadiyat Island and Al Raha Beach recorded growth of 2% and up to 6% respectively and the report suggest this is due to the relative small availability of stock actually for sale in the market. The amount of upcoming supply on Reem Island, together with sales rates peaking in 2015, resulted in a large decrease in demand from buyers in the first quarter of 2016. Sales prices on Reem Island recorded an overall downward trend for the first three months of the year with rates for City of Lights dropping by approximately 10%, Sun and Sky Towers and The Gate Towers decreasing by 5% and 6% respectively, and Marina Square prices falling by 6%. The traded price at Marina Square in Q1 2016 ranged between AED 1,230 to AED 1,350 per square foot. The report also shows that after a period of strong demand for villas throughout 2015, the first three months of 2016 recorded limited sales activity. In particular, the more affordable units in the Al Raha Gardens and Al Reef developments saw only a few transactions taking place, of which most were below market rates. In comparison new developments on Yas Island were… Continue reading
Commercial property lending market in UK seeing renewed confidence
Confidence has returned to the commercial property lending market in the UK as new loan originations hit a post crisis high, new figures shows. Indeed, the value of outstanding loan books saw its first increase since 2008, according to the most comprehensive study of the UK’s commercial property lending market from De Montfort. The total amount of outstanding debt at the year end in 2015 was £168.4 billion, representing a 1.9% increase from £165.2 billion at the year-end in 2014, and the first increase recorded since 2008. Overall some £53.7 billion of loan originations were recorded during the whole of 2015, compared to £45.2 billion in 2014 and while new lending volumes rose, the proportionate increase moderated to 18.8% in 2014/2015, compared to a post-crisis record of 51.2% in 2013/2014. The report says that further evidence that the market has recovered can be seen in the decline of almost 50% in the value of distressed loans, that is those in default and in breach of financial covenant. At the year-end in 2015, the value of distressed loans reported to the research was £12.1 billion, compared to £23.2 billion a year earlier and £47.6 billion at the end of 2009. Loan to value (LTV) ratios on existing loans continue to fall, reflecting the rise in commercial property values and banks continuing to lend on similar terms to recent years. At the year-end in 2015, some 87.5% or £123.5 billion of outstanding debt had a LTV ratio of 70% or less, compared to 77% or £107 billion at the year-end in 2014 and 63% or £99 billion at year end in 2013. Outstanding debt with a LTV between 71% and 100% represented 7.5% or £10.6 billion of the market, and just 5% or 6.9 billion had a LTV greater than 101%. Notably, average lending LTVs fell during the course of 2015 for all sub-sectors, suggesting good lender discipline despite the strength of the market. Although they still dominate the market, UK banks and building societies saw their market share continue to decline. They represented 34% of new loan originations at year end in 2015, the lowest level ever recorded by the research, compared to 39% the previous year. The proportion of outstanding debt held on their books also fell, from 49% of the total at year end in 2014 to 45.5% in 2015. For the first time, insurance companies were the second largest category of new loan originators, representing 16% or £8.57 billion of the total in 2015. The exposures of insurance companies now account for 15.1% or £25.4 billion of the market, compared to 12.7% or £21 billion in 2014. Regional distribution of outstanding loans showed a strong bias in favour of central London; 43% of the total outstanding debt is secured against real estate in the capital city, the highest result ever recorded by the research, and a dramatic increase from the 26% recorded in 2010. This indicates… Continue reading
Property sentiment remains steady in the UK, latest index shows
Households across the UK perceive that the value of their home rose in May, according to the latest house price sentiment index to be published. Some 25.6% of the 1,500 households surveyed for the index from Knight Frank and Markit Economics across the UK said that the value of their home had risen over the last month, while 3.6% said that prices had fallen. This resulted in a HPSI reading of 61.0 and although this was a slight increase on the 60.1 recorded in April, it remains below the peak of 63.2 reached two years previously in May 2014. The index report says that while sentiment picked up over the course of the month, it remains in line with the longer term trend. On a three month rolling basis the HPSI reading was 60.6 compared to 59.2 for the comparable period three months previously There was a notable pick-up in perceived house price growth among those aged 18 to 24 with the index rising to 57.7 in May, up from 52.6 in April, potentially reflecting affordability concerns among this age group. Conversely, household sentiment softened among those aged over 55 month on month, although such individuals remain the most bullish when it comes to perceived price growth. According to Gráinne Gilmore, head of UK residential research at Knight Frank, the steadiness of the headline house price sentiment index during such political uncertainty over the future of the UK in the European Union is a reflection that the fundamentals of the market remain unchanged. ‘There is still an imbalance between demand and supply of housing, and for those with access to deposit payments, mortgage rates are still near record lows. However, there has been some softening in sentiment among those aged 55 and over, the age-group who have the largest equity stake in the UK housing market,’ she pointed out. ‘While the sentiment reading for this group is still one of the highest, indicating they expect prices to rise, there has been a notable fall from last month, indicating that the current economic and political climate is affecting some corners of the market,’ she added. The future HPSI, which measures what households think will happen to the value of their property over the next year, rose slightly in May to 70.3, from 68.8 in April. Households in the South East were the most confident that prices will rise in the next 12 months at 79.5, followed by those in London at 78.2 and the East of England at 77.9. Expectations that interest rates will remain low for longer, as shown by Markit’s UK Household Finance Index, appear to have helped offset any concerns over the wider economic backdrop. Around 46% of households expect rates to rise in the next 12 months, down sharply from a peak of 78% in August 2015. Tim Moore, senior economist at Markit, explained that house price sentiment not only rose in May, but moved above the 2016 peak… Continue reading
