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Prime property market across UK not picking up, new analysis suggests
Prime property outside of London increased by just 0.6% in the second quarter of the year, suggesting there has been little sign of a post-election bounce at the top end of the UK housing market as buyers remain cautious. A lack of upward pressure on prices has been consistent across all regions beyond London, with a lack of urgency among buyers in part stemming from a relatively sluggish market in the capital, according to the latest prime residential market report from real estate firm Savills. The report says that this has combined with relatively high levels of stock available on the market, built up largely as a result of a relative dearth of transactional activity in the run up to the general election. ‘For the time being this has slowed the ripple effect, despite the significant value gaps between London, the commuter zone and beyond, which would normally drive a flow of demand through the different segments of the prime housing market at this stage in the cycle. As a result, annual price growth in the prime regional markets stands at a subdued 1.6% on average,’ it explains. Though the threat of a mansion tax has now evaporated, the report suggests that the market continues to be held back by tax considerations. ‘In London and at the top end of the country market, the increased cost of stamp duty, following the Autumn statement of December 2014, remains a barrier to both price growth and activity,’ is says. Illustrating this fact, in the regional housing market over £2 million prices are 1.7% below their June 2014 level. In Scotland the introduction of the Land and Buildings Transaction Tax, which replaced stamp duty in April has introduced higher rates of tax at lower price points, has caused prime values to fall by an average of 0.6% in the past quarter and by 0.9% year on year. In England and Wales the markets under £1 million and between £1 million and £1.5 million have been less affected by these tax concerns but more affected by weak buyer sentiment and the restricted availability of mortgage debt feeding up from the mainstream markets. The report points out that despite a continued benign interest rate environment, transactions in the mainstream market appear to have plateaued at around 1.2 million per annum. With the mortgage regulations restricting the amount of debt prospective buyers are able to obtain and restricting their ability to trade up the market, this is still well short of pre-crunch norms, it adds. Although mortgage availability has a less significant direct impact in the prime markets, it will impact on some buyers in their 30s and 40s, the report also suggests. ‘While restricting the amount they can borrow, this may act as a catalyst for them to move into the commuter zone as they look to stretch their debt and equity further in less expensive markets,’ it explains. While sellers need to remain realistic in… Continue reading
Office market in Saudi Arabia flat as new completions offset higher demand
Annual office take up in key Saudi Arabian cities is continuing to rise but higher demand is offset by new office completions, according to the latest report into the country’s commercial property market. In Riyadh and Jeddah in the 12 months to June 2015 this resulted in vacancy rates remaining broadly stable over the same period and rents were also unchanged in the two cities. The analysis from international real estate firm Knight Frank also shows that in the first half of 2015 Grade A and B office rental values in the capital stood at SAR1,300 and SAR900 per square metre per annum, respectively. Meanwhile, Grade A at SAR1,200 per square metre per annum and Grade B at SAR700 per square metre per annum rents in Jeddah were also flat. In Eastern Province, demand for office space was flat in the 12 months to June 2015 and the report points out that there is little to indicate that demand will rise in the near term, suggesting that the completion of new office projects will exert upward pressure on vacancy rates. However, with landlords in the market largely insensitive to changing supply demand dynamics, it is suggests it is difficult to see rents budging from their current levels of SAR1,050 for Grade A offices and SAR700 for Grade B offices. The report says that the current supply of Grade A and Grade B office stock in Riyadh stands at 3.5 million square meters, the majority of which is concentrated in the central and northern parts of the city. ‘Due to current dynamics we do not expect the market as a whole to see increased vacancy rates or a reduction in achievable rental rates as demand for quality commercial spaces that are well located and benefit from good floor plates will remain strong in the short to medium term,’ it adds. Supply of office space in Jeddah currently stands at 820,000 square meters with over 100,000 square meters of office supply due to be added to the market in the short term. As a result of construction delays, the first half of the year saw few completions which resulted in market wide vacancy rates remaining stable at 10%. Total stock is expected to exceed 1 million square meters in the medium term as new supply comes online and the report says that the second half of the year will see additional supply coming from a number of small to medium sized projects. ‘Due to the historic lack of Grade A stock in the market, we see robust demand for good quality offerings in the short to medium term as tenants look to upgrade to better quality premises and the non-oil economy continues to show healthy growth,’ the report adds. Whilst the Eastern Province does not benefit from a well-defined CBD, supply looks set to grow with a number of projects under construction due to be released to the market between the fourth quarter of… Continue reading
Private rental prices in the UK up 2.5% year on year
Private rental prices paid by tenants in Britain increased by 2.5% in the 12 months to June 2015, according to the latest data from the Office of National Statistics. There were regional variations and a breakdown of the figures shows that rental prices grew by 2.5% in England, 2.1% in Scotland and 0.8% in Wales. Rental prices increased in all the English regions over the year to June 2015, with rental prices increasing the most in London at 3.8%, followed by the East at 2.6% and the South East at 2.5%. Since the beginning of 2012, English rental prices have shown annual increases ranging between 1.4% and 3.0% year on year. Excluding London, England showed an increase of 1.7% for the same period. It is the biggest annual increase in average rents since January 2013 and according to Steve Bolton, founder of Platinum Property Partners, it is due to a shortage of suitable properties, coupled with strong consumer demand. He explained that demand for rental properties is coming from people priced out of the housing market and those who find renting better suits their lifestyle and this has set rental prices on an upwards trajectory. ‘This rise in rents isn’t likely to slow down any time soon, particularly as landlords now face a number of increasing costs. The prospect of an interest rate rise, together with the cap on mortgage interest tax relief introduced in the Budget, could pressure some landlords to increase their rents as they look to regain some of their profits,’ said Bolton. ‘While growing wage packets mean some tenants will be able to cope with higher rents, landlords should be focussing on revisiting their strategy rather than passing their costs directly on to tenants,’ he pointed out. Continue reading
