Tag Archives: real-estate
Record levels of investment in UK purpose built student housing
The UK property investment market is seeing record levels of money going into the student housing market with over £4.2 billion already in the first five months of 2015. This level of investment in purpose built student accommodation is 70% ahead of last year’s total and 40% above the previous peak in 2012, according to a new report from international real estate adviser Savills. The on-going expansion of the purpose built student accommodation sector has vastly transformed the state of student housing over the last 25 years, the firm’s latest report says. It explains that this investment market has also matured, growing from roots in the Business Expansion Scheme of the late 1980s to the listing of Student REITs on the London Stock Exchange. As the sector has developed, it has seen the bulk of investment activity shift from UK owner-operators to UK based private equity and institutions, and now to global institutional investors. Savills league table of future development potential for purpose built student housing finds 11 leading UK university cities and towns have opportunities for investors. The rankings for 2015, published in the report, are designed as a matrix to assess development potential, based on a number of factors including current and future supply and demand and the private rented sector. Top of the table are Bath, Bournemouth, Brighton, Bristol, Cardiff, Edinburgh, Kingston upon Thames, London, Manchester, Oxford and St Andrews. The next tier includes Aberdeen, Belfast, Birmingham, Cambridge, Canterbury, Chester, Chichester, Coventry, Durham, Exeter, Glasgow, Leeds, Plymouth, Portsmouth, Sheffield, Winchester and York. But those to pass on include Bolton, Bradford, Carlisle, Chislehurst, Cirencester, Coleraine, Cranfield, Hull, Ipswich, Middlesbrough, Newport, Paisley, Preston and Sunderland. ‘Despite a 1.7% fall in overall student numbers over the 2013/2014 academic year, full-time students, the key metric of student accommodation demand, increased, as did the number of students from non-European Union countries,’ said Neal Hudson, Savills research. ‘Following on from our analysis last year, the introduction of higher fees appears to have sustained a flight to quality. Falls in student numbers are typically highest in lower ranking universities, while higher ranking universities have generally seen an increase in domestic and foreign students,’ he added. The report points out that using UCAS data to look ahead, overall university applications and acceptances are up 3.4% and 3.3% respectively for the current academic year, equating to 16,800 more acceptances than the previous year. This brings the total number of students to over half a million for the first time. It also says that increased investment activity in the sector has led to yield compression across all sub-markets. This has particularly been the case for investments in prime London where direct let net initial yields are now below 5% at 4.75%. For 2015, Savills forecasts total returns of 14%. This is comprised of average blended yields compressing by 25 basis points and rental growth of 3.5%. Continue reading
Optimism and confidence returns to prime central London property sector
Optimism and confidence are returning to the prime central London property market after a long period of hesitancy amongst both purchasers and potential vendors in the run up to the general election, the latest research suggests. Viewings, offers, and sales have increased since 08 May across all sectors of the market and enquiries from both international and domestic purchasers have increased, particularly from the Middle East, according to W.A. Ellis, part of the JLL Group. The firm reports that in broad terms, capital values within the prime central London market fell during the first quarter of the year as the prospect of a Labour Government slowed the sales market and the level of transactions declined by as much as 30% in some sectors, with the number of house sales declining most significantly. ‘With the election over and a Conservative Government now in place, we believe that the market will revert to its pre-election state. We expect the price falls of recent months to reverse, with some price rises materialising and with five year predicted growth estimated to be in excess of 20%,’ said director Richard Barber. ‘However, we still expect price growth to be quite modest this year, particularly as the market has not yet had time to adapt to the stamp duty reforms of late 2014. This still hangs over the upper end of the market and still restricts transaction levels and potential capital growth,’ he explained. ‘Whether the decision to raise SDLT to 12% on the proportion of a purchase over £1.5 million will be regarded as a masterstroke in defeating mansion tax and cooling central London prices or, as I believe is more likely, an overzealous measure which will reduce HMRC's revenues, is yet to be decided,’ he pointed out. He now hopes that the ‘politicising’ of the market will cease and the Government can address genuine issues. ‘What is most apparent, however, is that mortgage rates will undoubtedly begin to rise as long term swap rates begin to creep upwards and affordability, particularly for first young time buyers, will be strongly affected. My view, and it is one shared with many within the industry, is that a mortgage rate fixed for five years at circa 2%, is as good as it will get, and one should act swiftly to obtain these short term offers,’ said Barber. He also mentioned the shortage of suitable housing for older people that is keeping home owners stuck in properties worth £820 billion and leaving £7.7 million spare bedrooms empty. Recent research suggests that almost a third of home owners over the age of 55 have considered downsizing over the past five years, yet only 7% have actually done so. ‘It would seem obvious that older people are remaining in their homes due to a fear of their children not being able to afford homes of their own, the transactional costs involved in downsizing, including prohibitive stamp… Continue reading
Surge of new home sales in the US due to demand outpacing supply
New home sales in the United States surged in April and they are selling quickly as not enough are being built to meet demand. Specifically, new home sales rose 26% from one year ago in April to an annualised pace of 517,000 annualised pace, the third highest monthly activity in eight years, according to data from the National Association of Realtors. The data also shows that the median price was $297,300, which is 8.3% above last year’s price and on average it took four months to find a buyer. The gap between new home price and existing home price still remains very wide, however, and according to Lawrence Yun, Nar chief economist, it implies that existing homes provide a relatively better bargain in relation to newly constructed homes. ‘Even though new home sales are rising strongly in percentage terms, they are only at about half the activity as during the bubble years nearly a decade ago. This implies, first, that today’s strong activity is not likely to be a bubble. Second, there is more room to grow,’ Yun explained. He also pointed out that the median number of months to find a buyer of new homes remains near historic lows. ‘Given the low supply of both existing and new home inventory, as evidenced by low months supply of inventory, there is zero concern over any over production,’ he said. For the year as a whole, new home sales are projected to rise by about 30% in 2015 and then another 20% to 25% in 2016. ‘It’s a good time to be a home builder. If only the banks would make more construction loans or, depending upon your point of view, if there were less financial regulations to permit banks to make more construction loans,’ Yun added. Continue reading
