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London and Paris still dominate wish list of European real estate investors
European real estate investors are increasingly looking beyond London and Europe’s gateway cities such as London and Paris as they seek to meet their return objectives, new research suggests. But not every regional city is suitable for investors and returns can disappoint in the medium term if one does not factor-in local market fundamentals such as local growth trends, demographic changes and human capital, it points out. According to the latest LaSalle Investment Management’s European Regional Growth Index (E-REGI), which ranks Europe’s top 100 cities, the region’s economy is driven by dynamic urban centres with London and Paris once again in first and second position in the ranking. The index report explains that the extraordinary resilience of such cities, combined with their deep investment markets, justifies targeting them for a wide range of investment strategies. Other cities increasingly coming to the fore include Manchester at 17 and Bristol at 25 which have both climbed three spots in the European ranking, while Birmingham at 37 is up two spots. ‘Having published this index for 16 years, we now have an unrivalled understanding of the different economic patterns in Europe’s leading cities,’ said Mahdi Mokrane, LaSalle Investment Management’s head of research and strategy for Europe. ‘The index not only determines which real estate markets are likely to out or underperform in the medium term, but combined with our on the ground expertise we also use the index as a strategic framework to match cities with the most relevant investment styles,’ he explained. In order to help investors navigate the complexity of the different strategies which best match different cities, LaSalle has categorised them into four distinct groups: consistent, affluent, mover and aspiring. Consistent is the largest group in the E-REGI analysis. Cities in this group are generally sizeable and combine deep investment markets with long term economic strengths related to demographics, technology and urbanisation (DTU), creating the right conditions for growth focused strategies. London and Paris top this group of consistent performers, but balanced E-REGI scores and consistent performance over time are not limited to the top of the ranking. Munich, Frankfurt, Hamburg, Stuttgart and Amsterdam also seem suited for value-add or opportunistic strategies. Düsseldorf, Mannheim-Karlsruhe, Cologne-Bonn, Rotterdam-The Hague, Utrecht, Edinburgh and Leeds are also included in the group but the report says core investment would be more suited given their smaller market size. Affluent is a small group of cities that also support long term strategies but are more difficult to transact-in due to their smaller size and stronger domestic investor base. Consumer related strategies are most attractive in these cities as their strong E-REGI scores are predominantly driven by their wealth and research and development spending components. This group includes Stockholm, Luxemburg, Oslo, Copenhagen-Malmo and Zürich. Movers are more ‘cynical’ market where timing is of the essence for investment in these more cyclical markets. For example Spanish cities have seen moves at both the top and the bottom of the… Continue reading
US pending home sales fall slightly but still well above a year ago
Pending home sales in the United States retreated in August but remained at a healthy level of activity and have now risen year on year for 12 consecutive months, the latest real estate data shows. A modest increase in the West was offset by declines in all other regions but demand continues to outpace supply, according to the index report from the National Association of Realtors. The Pending Home Sales Index, a forward looking indicator based on contract signings, decreased 1.4% to 109.4 in August from 110.9 in July but is still 6.1% above August 2014 when it was 103.1. Lawrence Yun, NAR chief economist, said that even with the modest decline in contract signings, demand continues to outpace housing supply and elevate price growth in numerous markets. ‘Pending sales have levelled off since the middle of summer, with buyers being bounded by rising prices and few available and affordable properties within their budget. Even with existing housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago,’ he explained. According to Yun, sales in the coming months should be able to roughly maintain their current pace. However, he warns that there are looming speed bumps that have the potential to impact housing. ‘The possibility of a government shutdown and any ongoing instability in the equity markets could cause some households to put off buying for the time being. Furthermore, adapting to the changes being implemented next month in the mortgage closing process could delay some sales,’ Yun added. The national median existing home price is expected to increase 5.8% in 2015 to $220,300. Yun forecasts total existing home sales this year to increase 7% to around 5.28 million, about 25% below the prior peak set in 2005 when they were 7.08 million. A breakdown of the figures shows that the PHSI in the Northeast fell 5.6% to 93.3 in August, but is still 8.9% above a year ago. In the Midwest the index inched down 0.4% to 107.4 in August and is now 6.5% above August 2014. Pending home sales in the South declined 2.2% to an index of 121.5 in August but are still 4.1% above last August. The index in the West rose 1.8% in August to 104.9 and is now 7.6% above a year ago. Continue reading
Monthly residential rents in Ireland up 7.1% quarter on quarter, latest index shows
Monthly rents for private sector accommodation across the Ireland increased by 7.1% in the second quarter of this year compared with the same period last year, the latest published data shows. Nationally, rents for houses were 6.4% higher, while apartment rents were 7.6% higher than in the second quarter of 2014, according to the data from the Private Rented Tenancies Board (PRTB) which is regarded as the most accurate and authoritative rent report of its kind on the private accommodation sector in Ireland. Annual growth in the Dublin market was stronger, up by 9.2%. Dublin house rents were up 8.8% and Dublin apartment rents were higher by 9.4%. However, annual growth in rents for the market outside Dublin remains more subdued, recording growth of 5.8% when compared to the second quarter of 2014. There is also a gap in the performance by property type. The rent for houses outside Dublin increased by 5.8%, while apartments outside Dublin experienced an increase of 5.9%, according to the data which is based on actual rents being paid rather than asking or advertised rents. The rent for private sector accommodation across the whole country in was €878, up from €820 in the second quarter of 2014. The rent for apartments nationally was €922 compared to €857 a year earlier and for a house it was €853 compared to €801 a year earlier. In Dublin, the rent was €1,387 for a house and €1,260 for an apartment compare to €1,275 and €1,152 respectively in the second quarter of 2014. This represents a monthly increase in Dublin rent of €112 for a house and €108 for an apartment over the course of the 12 month period. Outside Dublin, the rent was €677, with houses averaging €695 and apartments €660. A year earlier, these figures stood at €640, €656 and €623 respectively. This represents a monthly increase in rent outside of Dublin of €39 for a house and €37 for an apartment in the 12 month period. Looking at the quarter on quarter picture for 2015, nationally the rate of increase in monthly rent levels was 2.9% in the second quarter of this year compared to the first quarter of 2015. This compares to a national quarterly growth rate of 1.3% in the first quarter of 2015. Looking at trends in more detail, monthly rents for houses recorded quarter on quarter growth of 2.4% in the second quarter of the year, while rents for apartments grew by 3% when compared with the first quarter of 2015. The results show quarterly growth in rents outside Dublin of 2%, with rents in Dublin showing stronger growth of 4.2% in the quarter. Rents for houses in Dublin grew by 2.9% compared to the first quarter of 2015, while Dublin apartment rents were higher by 4% in the quarter The rent indices show, for properties outside Dublin, rents in the second quarter of 2015, when compared with the first quarter… Continue reading
