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Apartment prices likely to remain high in Hong Kong despite promise of more supply
The Hong Kong government has signalled that it is determined to tackle the imbalance between housing demand and supply and confirmed that it will make residential sites available for construction. This year’s land sale programme will inlcude 29 residential sites and the Hong Kong Monetary Authority has announced a seventh round of cooling measures for the residential small to medium sized apartments market which is likely to reduce transactions in the short term. Most of the enw residential sites are likely to be in the New Territories and provide around 16,000 new homes. Taking into account land supply in general it is expected that some 19,000 units could be provided in 2015/2016, meeting the government’s supply target. According to the latest monthly Hong Kong Review report from Knight Frank prices in the small to medium sized sector have been rising since 2010 despite the implementation of various cooling policies. The international real estate firm thinks the latest measures may affect sales in the coming months but will have a limited effect on prices due to strong demand from first time buyers. For residential properties worth HK$7 million or below, the maxium Loan to Value ratio (LTV) has been lowered to 60% from the previous 60% to 70%. For borrowers buying a second property the maximum debt servicing ratio has been lowered from 50% to 40%. Office sales have also been slow. In February only a few major transactions were recorded, but the report says there were signs of investors returning to the market. Grade A office prices in major business districts have not seen notable growth since the end of 2014. ‘However, rental growth is expected to support capital appreciation and we expect investors to continue to increase their focus on the office sales market this year,’ the report explains. In the office leasing market divergent trends have been seen. On the one hand finance, insurance and medical beauty companies are continuing to expand and driving up office demand. But sourcing and logistic firms face intense competition from cities such as Shanghai and Singapore and prefer to relocate to reduce costs. ‘Looking ahead we believe Grade A office rents on Hong Kong island will continue to increase in 2015, mainly driven by strong demand from companies looking to expand in these areas with limited supply and where vacancy rates remain low,’ it concludes. Continue reading
Home affordability in UK cities deteriorates to 2009 levels
The past year has seen a deterioration in affordability in UK cities, driven by rising house prices across the country, with Oxford names as the least affordable. Stirling in the most affordable and Aberdeen as seen the highest house price growth since 2005, according to the latest Lloyds Bank Affordable Cities Review. The average UK city house price has risen by 7%, from £181,667 in 2014 to £195,107 in 2015 and this has resulted in affordability in the nation’s cities worsening in the last 12 months from 5.8 to 6.1 times gross average annual earnings, the second successive annual decline in affordability. Affordability in UK cities is, on average, now at the same level as in 2009 but is 15% lower than the peak of 7.2 times earnings in 2008 at the height of the last housing market boom. The overall improvement in affordability across UK cities as a whole over the past seven years has been caused by a combination of an average house price decline of 6% and an increase in the gross average annual earnings in UK cities of 11%. Oxford’s average house price is 11 times the gross average earnings in the city. At an average price of £361,469, houses in Oxford are more expensive compared with local average earnings than any other UK city. This is partly due to Oxford’s attractiveness to commuters working in London. Winchester at 10.11, Cambridge at 9.76, Chichester at 9.19 and Brighton and Hove at 9.10 make up the top five least affordable cities. Greater London is not far behind with average property prices 8.75 times average gross annual earnings. This average figure disguises considerable variations across the capital with central boroughs being significantly less affordable than the Greater London average. The data also shows that Lichfield at 6.95, York at 6.83 and Leicester at 6.54 are the least affordable cities outside southern England. Stirling remains the UK’s most affordable city despite a deterioration in affordability over the past year. The average property price in the Scottish city of £158,645 is 3.9 times gross average annual earnings. Four of the 10 most affordable UK cities are in Northern Ireland due primarily to the relatively low house prices in the country with Londonderry at 3.92, Belfast at 4.49, Newry at 4.51 and Lisburn at 4.63. The most affordable cities in England are Lancaster at 4.03 and Bradford at 4.17. ‘House price rises in the past two years have resulted in a deterioration in home affordability in the majority of UK cities, and generally widening the north/south affordability divide as the market has been strongest in the south,’ said Andy Hulme, Lloyds Bank mortgages director. ‘The UK’s most successful cities economically have tended to see the strongest property price rises. Aberdeen, the country’s oil and gas capital, has recorded the biggest gains over the past decade whilst London has been the top performer during the economic recovery,’ he added. An analysis reveals a significant north/south divide in city… Continue reading
House price growth in UK cities continues to fall, latest index shows
The rate of house price inflation in UK cities continues to slow with growth of 10% in the 12 months to February compared to 11.6% six months ago, the latest data shows. But there is considerable regional variation with house price growth ranging from 3.6% in Newcastle to 12.9% in London, according to the Cities House Price Index from residential analysts Hometrack. The highest growth cities in the last quarter were Glasgow and Liverpool, but average values remain 13% and 15% below their 2007 peak. While house price growth in high value cities such as London, Oxford and Cambridge continues to slow, lower value cities registered a sharp uplift in transaction volumes in 2014 as demand for housing grows, which suggests there is substance to the recent pick-up in house price growth. Rising transaction volumes are an important precursor to house price inflation. The 15% to 35% uplift in transactions in 2014 indicates the most significant recovery in house market activity in cities outside of the South East of England since 2007. Belfast, Leeds, Liverpool and Cardiff all registered a 20% to 39% growth in sales volumes in 2014 compared to the average for the previous five years. Rising demand and increased market activity have resulted in increased house price inflation, which is running at between 5% and 8%. In contrast, double digit house price to earnings ratios in the higher value cities in the South East of England are impacting demand. Growth in housing transactions in 2014 compared to their five year average was well below average. Sales volumes were down in all the high growth cities over 2014 compared to 2013, specifically falling 13% in Cambridge, 7% in Aberdeen, 2% in Oxford and 1% in London. Lower sales volumes are feeding into a slower rate of house price growth in these cities, the index report says. It also says that falling sales volumes combined with a general slowdown in activity in the run up to the general election are resulting in lower mortgage approvals for home purchase. Home owners using a mortgage to buy a home accounted for two thirds of sales in 2014 according to analysis by Hometrack. The remaining third of sales were to cash buyers or those borrowing with a buy to let mortgage, groups who are not subject to mortgage affordability tests. ‘Transactions are a lead indicator for house prices. The acceleration in house price growth in London in the last two years was preceded by three years of rising transactions,’ said Richard Donnell, director of research at Hometrack. ‘A similar pattern is being registered in the cities outside the south of England, as pent-up demand returns to the market supported by low mortgage rates and an improving economic outlook,’ he explained. ‘While the pick-up in activity is welcome news, housing sales in 2014 are still 38% lower than the level seen in 2007 and 10%… Continue reading
