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UK commercial property market set to see record breaking year as confidence rises
Strong investor confidence is set to propel the UK’s commercial property market into a record breaking years with deal volumes at the end of the third quarter already over £50 billion. If, as anticipated, volumes in the fourth quarter of 2015 follow the patterns observed in the final quarters of 2013 and 2014, investment in the UK commercial market this year will break the £70 billion barrier for the first time. According to international real estate advisor Savills it is the strong confidence in the market that is the driving force behind the growth in activity. Its latest report says that despite ongoing uncertainty over Greece’s position in the Eurozone and a slowdown in the Chinese economy, UK property as an asset class continues to outperform investor expectations. Average prime yields have remained at 4.65% for the second successive month, however resurgent retail activity and strong UK institutional interest in south east offices could exert downward pressure on yields in these sectors, the report warns. ‘Last year 59% of investment activity in UK property took place outside London, a trend that is set to continue as investors seek the value afforded by the rental growth prospects in supply constrained regional markets, alongside the opportunity to build scale by acquiring portfolios,’ said Kevin Mofid, research director at Savills . ‘However, regional markets can be more susceptible to Government policy changes than the capital. Investors should therefore consider the potential impact that the extension of commercial to residential permitted development rights could have on rental growth and vacancy rates in regional office and industrial markets,’ he explained. ‘Nonetheless, given that investors currently place UK property head and shoulders above other asset classes, we don’t envisage that these measures will materially affect investment activity going into 2016,’ he added. A separate report from Savills says that non-domestic real estate investment outside of London will reach a record high by the end of 2015 with some £10.5 billion invested in real estate outside the capital by international investors in the first eight months of 2015. Savills predicts that this will rise to £14 billion by the end of 2015, the highest volume since it started collecting data in 2000, and nearly half of all the non-domestic investment in the UK as a whole. In the 12 months to August 2015, portfolio purchases accounted for the majority, 64%, of investments, due to the preference of investors for larger lots which are less common outside of London. Scotland and the South East proved to be the most popular regions, each attracting a 7% share of investment, with the North West and West Midlands in joint second place attracting a 5% share each due to the strong rental growth projections for the Manchester and Birmingham office markets, as well as the comparatively high yields on offer. The most popular sector for investment is retail and leisure, accounting for 57% of investment, driven by several… Continue reading
Call for more support for equity release in UK housing market
Housing wealth in the UK should be used to better support an ageing population by making equity release more accessible and allowing it to develop further, it is claimed. The Equity Release Council has released key recommendations in a White Paper calling on the Treasury to take a lead on coordinating relevant policy to benefit consumers. It examines how people's housing wealth can provide people with an additional source of finance in later life and help the Government to better support the UK's ageing population. The Council proposes that the Treasury's oversight of other relevant departments, including the Department for Work and Pensions, the Department for Communities and Local Government and the Department of Health, combined with its responsibility for financial services, makes it the natural choice to coordinate policy on equity release. The report also identifies where Government policy could do more to consider equity release as a way of meeting people's retirement needs, and where regulation is providing direct challenges to the development of the sector. It argues that a cohesive approach across departments is necessary to avoid unforeseen consequences and ensure the maximum benefit for consumers and Government. The White Paper includes specific recommendations, including that the Government should consider the role of equity release as part of its strategy for addressing the challenges of an ageing society, ensuring that people are able to utilise housing wealth to improve their income and wellbeing in retirement where appropriate. It also suggest an expansion of the scope of the Pension Wise service to enable users to understand how accessing housing wealth may provide solutions to satisfy their objectives and a consideration of how equity release can be utilised to help people pay for home care, providing financial resources which can help people retain ownership of their home and stay living in it for longer. In conjunction with local authorities and other stakeholders, it says it is possible to develop clear pathways for local authorities to use to help people who are seeking support on financing care services understand when they should access regulated financial advice and how they should go about doing so. It also calls for the development of a range of case studies to illustrate best practice on referral to financial advice on care funding and using the Financial Advice Market Review as an opportunity to ensure that people nearing retirement are able to access independent financial advice, which allows them to consider the full range of relevant issues including retirement funding, paying for care, home adaptations and leaving money to children and grandchildren. It wants the Financial Conduct Authority's (FCA) review of the equity release market is wide ranging and considers the impact of the regulatory framework on the equity release market, as well as other potential barriers to increasing the size of the market. ‘The equity release sector is growing fast, and is likely to become even more popular in the next few years. This growth is driven by a… Continue reading
Over half of UK home owners think EU vote will affect property prices
The UK referendum on the country’s future in the European Union is still years away but already home owners think it will have an impact on property prices. Some 55% believe that leaving the EU will have an impact on house prices in the UK. Of these 34% think leaving the EU would actually strengthen the value of their home, with 21% believing it will lead to a decrease in their property price, according to the poll by eMoov. It is thought the economic impact of leaving the EU will be felt hardest in London, however some 52% of those surveyed in London think it will push up the price of their property, with just 23% thinking the opposite. When Britain first joined Europe in 1973, the average house prices was just £9,045. Despite a post legislative referendum in 1975, UK house prices continued to increase for another 16 years to 1989. During Britain’s tenure as a member of the EU the average UK house price has increased by more than 2,000%. Based on these figures, it would seem the EU has been good for the UK property market, but Britain’s future in Europe still remains uncertain. ‘The consequences of exiting the European Union stretch far beyond its effect to UK property prices, however homeowners across the nation are understandably apprehensive as to the impact it could have on their property price, as our research shows,’ said the firm’s chief executive officer Russell Quirk. Pro EU campaigners have forecast central London will be worst hit if Britain does choose to leave the EU. ‘We saw how pre-election uncertainty froze property demand in the prime central London market. The uncertainty of Britain’s future in the EU could result in a similar effect on a much larger scale, but 52% of home owners in London seem confident a Brexit will only strengthen the value of their home,’ he explained. ‘This said, post-election stability failed to revive the high end London market, so who’s to say the same won’t happen if we do come out of the EU,’ he concluded. Continue reading
