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Property valuations increased in UK in June despite EU referendum
The pace of property valuations conducted in June 2016 in the UK increased both an annual basis and month on month, according to the latest research. The total number of valuations carried out in June rose by 4% compared to June 2015, and 24% compared to the previous month, the report covering the month of the European Union referendum from Connells Survey and Valuation shows. John Bagshaw, corporate services director of Connells Survey & Valuation, pointed out that the background to the figures is one of uncertainty and shock in the days after the UK decided to leave the EU, yet the property landscape appears surprisingly stable which he believes is encouraging. ‘Initial solidity from the post-Brexit housing market may not be enough to answer all the new legal and financial questions in light of the vote or to offset a likely blow to confidence on the near horizon. But this should bring such fears into perspective. Life will go on and the property market will continue to function,’ he said. Leading the June housing market, activity from first time buyers accelerated last month, making up for a considerable slowdown in buy to let valuations. Numbers taking their first step onto the property ladder rose 23% year on year, whereas buy to let valuations decreased by 40% over the same period. This is on the back of 27% month on month growth for first-time buyer valuations, ahead of the general seasonal pick-up in total activity while buy to let valuations increased by 17% since May, considerably slower than the overall picture. ‘First time buyers continue to drive activity in the housing market, an emerging trend since the start of the year and now reaching a new peak. Government schemes such as Help to Buy continue to be significant. But now a slowdown in the buy to let sector may be adding an extra short term boost for new buyers, as competition from landlords diminishes a little, easing the hunt for a home for sale,’ Bagshaw explained. Remortgaging has also seen a significant boost in valuation activity in June. The number of valuations carried out in June for those looking to remortgage rose by 18% on a 12 month basis and 19% month on month. Home movers were more cautious. Valuations for existing home-owners looking to move to a new property decreased by 7% on an annual basis since June 2015. However the number of such home owner valuations rose by 29% since May. ‘Home movers have once again had a stable month, and this section of the market has enjoyed the strongest seasonal acceleration from May. Meanwhile, remortgaging is the other major winner from a time of consistently low mortgage rates and a possibility of even lower borrowing costs over the summer,’ Bagshaw pointed out. ‘As seen in recent months many people are taking… Continue reading
Rental growth in prime central London down 3% in year to June 2106
Annual rental value growth in London’s prime property market fell by 3% in June, continuing a decline experienced in recent months that has been driven by higher stock levels and uncertainty in financial markets. The index report from real estate firm Knight Frank relates to before the UK’s decision to leave the European Union, but Tom Bill, head of London residential research said that the current sense of uncertainty following the vote is likely to boost rental demand in the short term. ‘However, any upwards pressure on rents is likely to be countered to some extent by rising stock levels, which will tick up in line with the ongoing uncertainty in the sales market and there is early anecdotal evidence that some vendors are deciding to let their property until more clarity emerges,’ he explained. Bill pointed out that underlying demand remains strong and the number of new prospective tenants that registered in June was the highest it has been since September 2015 and the number of viewings was the third highest on record. Meanwhile, the number of new tenancies agreed in June 2016 was almost identical to the same month in the previous two years. ‘For investors able to see through the current political bout of political uncertainty, there are also grounds for longer term positivity,’ Bill added. The prime gross yield in June was 3.1%, which is markedly in excess of the current record-low yield on a 10 year government bond of about 0.8%, or the so-called risk-free rate and Bill pointed out that a mood of indecision in financial markets is also more accentuated than it was before the Brexit vote, which will also cause some tenants, particularly in financial services, to rent for longer. ‘More broadly, uncertainty over the result of the referendum has been replaced by uncertainty over the more nuanced question of the UK’s relationship with Europe and demand will strengthen further as clarity emerges surrounding key negotiating positions,’ Bill said. He also pointed out that as the Brexit negotiation process unfolds, it should be remembered that no candidate for Prime Minister has indicated any willingness to relinquish London’s role as Europe’s leading financial centre. Indeed, Chancellor George Osborne has signalled he may cut corporation tax in a sign that London will strive to remain competitive versus other European cities, both as the key financial and tech market in the continent. The prospect of an interest rate cut in the UK is also likely to stimulate a degree of activity and the likelihood of further cuts by central banks in other countries, particularly in Asia, will cause global investors to seek the type of higher returns on offer in property, according to Bill. ‘This search for yield will be allied to a favourable currency play due to the current weakness of Sterling. Meanwhile, other fundamentals that remain unchanged after the referendum include the supply shortfall and projected population growth over the next decade in London, factors that will… Continue reading
Decline in farmland values in England slows in second quarter of 2016
English farmland values fell by just 1.7% in the second quarter of 2016 compared with a drop of 3% during the first three months of the year, according to the latest index. The average value of English farmland is now £7,773 an acre, some 6% lower than the record high of £8,306 an acre from last September. But over five years it is up 26%, over 10 years up 160% and over 50 years some 4,763% higher. The Knight Frank Farmland index says this compares strongly with other asset classes and also says that demand remains despite the decision by the UK to leave the European Union. Indeed, the index data was collected after the historic referendum on 23 June. The report points out that in the last decade the top end of the residential market in central London, for example, has increased by 98% over the same period, although a post-Brexit scramble for safe haven assets has seen gold’s 10 year return hit almost 200%. ‘Given that agriculture is the biggest recipient of EU funds via the Common Agricultural Policy (CAP) so many UK farming businesses rely on farm subsidies to break even, it might have been expected that the Brexit vote would have had a bigger effect on prices,’ said Andrew Shirley, head of rural research at Knight Frank. ‘However, there are a number of reasons why this hasn’t happened. According to polls, a majority of farmers backed Brexit so the sector will not be unduly pessimistic following the referendum, he explained. ‘The slide in sterling has also had an immediate upward effect on wheat prices and will help livestock exports. Sterling’s loss also makes UK farmland better value for overseas investors. We have already received a number of enquiries from a wide ranging geographic spread of potential buyers attracted by this currency boost and also farmland’s safe haven status,’ he added. Shirley also pointed out that a new round of potential quantitative easing currently being mooted by a number of central banks could accentuate this trend. ‘Prices should remain steady for the rest of the year, but looking further forward it is harder to judge where they will head,’ he said. ‘Much will depend on the outcome of the UK’s trade negotiations with the EU and the rest of the world, as well as how the government decides to replace the CAP. If any of these changes render some farming businesses unsustainable we will likely see more land come to the market,’ he explained. ‘This could put downwards pressure on values, but it will also present opportunities for entrepreneurial businesses and investors, and demand should remain firm,’ he concluded. Continue reading
