Tag Archives: real estate
Investment in European commercial property up by 25% in 2015 year on year
A total of €64.5 billion was invested in European commercial property in the final quarter of 2015, which took volumes for the full year to €238.5 billion, a 25% increase on 2014. However, the fourth quarter total was only slightly up, by 0.5%, on the same quarter of 2014, indicating that investment growth lost a little momentum towards the end of the year, according to the latest European quarterly commercial property outlook report from Knight Frank. However, it shows that increases in investment activity were widespread in 2015, with the core markets of the UK, Germany and France all seeing transactions rise by more than 20%. Among peripheral markets, investment volumes grew particularly strongly in Italy and Portugal, both fuelled by surging demand from international investors. The strength of investor demand kept European prime yields under downward pressure throughout 2015, although the pace of yield compression slowed in the final quarter. Also, the European weighted average prime office yield came down by four basis points in the final three months of 2015 to an all-time low of 4.79%, largely on the back of yield compression in Amsterdam, Berlin, Brussels, Copenhagen and Lisbon. The report points out that with large amounts of capital continuing to target European property, strong investment activity is expected to continue in 2016. However, the exceptional growth in transaction volumes seen in 2015 is unlikely to be repeated. Knight Frank’s forecast is that European investment in 2016 will be broadly in line with 2015 volumes. Many of the factors that supported the investment market in 2015, including the stabilising Eurozone economy, low interest rates and wide yield spreads to other asset types look set to remain favourable to property investors throughout 2016, the report says. The report also points out that Eurozone GDP growth is forecast to improve modestly to around 1.7%, following an increase of 1.5% in 2015. The European Central Bank has indicated that it may be prepared to make further interest rate cuts to support economic growth at a time when its main refinancing rate is currently 0.05% and the deposit rate is already in negative territory at -0.3%. Supported by the stabilisation of the Eurozone economy, European occupier market activity improved healthily in 2015. On an annual basis, aggregate take-up in the major markets monitored by Knight Frank rose by 10%. This was despite falling take-up in Europe’s two largest markets, London and Paris, and was driven by the strong performance of German, Iberian and CEE markets. Prime rents remained stable in the majority of European markets in the fourth quarter but the Knight Frank European Prime Office Rental Index rose by 0.9%, driven by increases in Dublin, Frankfurt, London (City), Madrid and Stockholm. The report suggests that rental growth may spread to a wider range of cities in 2016 with Paris, for example, expected to see prime office rents increase following more than two years of stability. Continue reading
Continued UK house price growth underpinning positive sentiment
Households across the UK believed that the value of their home rose in March with the imbalance between demand and supply underpinning house prices growth. Some 25.1% of the 1,500 households surveyed for the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics, across the UK said that the value of their home had risen over the last month, while 4% said that prices had fallen. This resulted in a HPSI reading of 60.5. This is the thirty-sixth consecutive month that the reading has been above 50. Households in every region perceived that the value of their home rose in March, however there were significant regional variations, reflecting wider trends in pricing across the UK market. Londoners perceived the biggest increase at 71.7, followed by those in the South East at 67.4 and East of England at 66.3. In Scotland and the North West the perceived rate of growth was slower at 53.3 and 54 respectively. The future HPSI, which measures what households think will happen to the value of their property over the next year, rose in March to 71.6, from 69.8 in February. March’s reading was the highest recorded by the index since August 2014. The rise in future sentiment was driven by households in southern England, with those in the South East at 81, the East of England at 80.3 and London at 78.9 were notably more confident than those in the North East at 61.4 and Scotland also at 61.4. ‘The fundamentals for the UK housing market remain steady, especially around mortgage costs which remain at record lows. The imbalance between demand and supply of housing is also underpinning house prices. The delivery of new homes remains some 30 to 40% below the levels needed to start to address the annual shortfall of housing in the UK,’ said Gráinne Gilmore, head of UK residential research at Knight Frank. ‘There have already been several large targeted government policies to try and boost development and ease the path of first time buyers and it is notable the future sentiment reading for 25 to 34 year olds is the highest it has been for 15 months,’ she pointed out. ‘As reflected in the index, the sound fundamentals of the market will combine to support overall prices in the coming year, but as the index also reveals, the market will continue to be multispeed across regions and price bands,’ she added. Tim Moore, senior economist at Markit, explained that the latest survey is a clear signal that UK house prices have stayed on an upward trajectory throughout the first quarter of 2016. ‘One of the factors supporting price sentiment seems to be the expectation that interest rates will remain ultra-low for longer, and this belief has become more widespread so far this year. Households’ current price sentiment is stronger now than at any time over the past 17 months, but the economic landscape is not lacking in potential headwinds for buyer confidence,’… Continue reading
Equity release lending hits new record in UK
Equity release lending activity on homes in the UK surged in the second half of 2015, recording its strongest growth rates since 2008. The in-depth report from the Equity Release Council shows the average initial amount of housing wealth unlocked by equity release customers via drawdown mortgages in the last six months of 2015 was £49,607. It points out that continued house price growth across much of the UK means many homes can 'earn' more than the average salary. This increases the appeal for home owners over the age of 55, who may no longer be working themselves, to improve their finances in later life by unlocking wealth tied up in their home, while retaining the right to tenure. The most common age to draw money through equity release is 65 to 74 but there has been particular growth in the 55 to 64 age group and those aged 85 and over. Over half of 55 to 64s opt for lump sum lifetime mortgages, while from 75 onwards four in five plans are drawdown mortgages Every region in England saw drawdown mortgage customers take an initial advance worth more than a year's take home pay for the average full time worker in that region. In London, drawdown customers withdraw the equivalent of 130 weeks' pay at £72,858. For lump sum customers in all UK regions except Scotland, where 91 weeks' worth of pay is released, the average withdrawal of housing wealth was equal to more than two year's take home pay. London again had the greatest sums taken out at £209,739 or 373 weeks' income. The five years from 2011 to 2015 have all seen a surge in equity release activity during the second half of the year. Indeed, the second half of 2015 saw a 26% rise in the value of lending compared with the first half, from £710 million to £898 million, the biggest half year growth rate of the post-2008 era. The Council's analysis of data for the second half of 2015 also shows product choice differs by age group, however. Between 65 and 74 product preferences closely match the overall market and 68.2% of plans taken out by this age group are drawdown and 31.8% are lump sum. The UK average is split 66.6% drawdown to 32.8% lump sum, and home reversion made up the remainder. Customers aged 55to 64 bucked the overall trend with the majority, 54.5%, choosing lump sum products. In contrast, from age 75 onwards four out of five opt for drawdown plans, taking an initial sum in later life while preserving an additional sum to withdraw as the need arises. ‘Equity release products continue to prove versatile in helping customers meet a range of financial needs before, at and during retirement. As a result, there is growing recognition from UK consumers, regulators and politicians that housing wealth can, and should, play a greater role in financial planning for retirement,’ said Nigel Waterson, chairman… Continue reading
