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UK retail property market needs to take online shopping into account in 2015
A dwindling supply of well-located retail property stock in the UK will continue to drive South East and London rental growth, which will be factored into pricing by investors, according to a new analysis. Well-placed good secondary retail assets with solid demographics, will sell well and overall schemes with the broadest consumer appeal will thrive at the expense of the poorer quality ones, says the latest UK retail property market outlook 2015 report from Knight Frank. Key attributes could be the quality of tenant mix and accessibility, although the out of town market has moved steadily towards fun shopping, the report suggests. ‘As we have seen with high streets and shopping centres, the best out of town parks now provide an increased focus on a strong leisure and catering offer aimed at prolonging dwell times and boosting expenditure, the report explains. One potential cloud on the horizon, with the growth of online sales bringing store networks under ever increasing scrutiny, is the forthcoming rush of lease expiries will provide retailers with an unprecedented opportunity to reduce property costs by downsizing their portfolios. ‘This is likely to reinforce the polarisation already being seen in the market, with secondary/weaker schemes suffering at the expense of the better schemes, bringing with it greater divergence in investment performance. That said, while the rise of online shopping may result in smaller store portfolios, the growth in click and collect is helping to maintain the importance of the store,’ the report adds. Knight Frank predicts that omni channel retailing will become the dominant norm in 2015. Occupiers will need to implement in store technology advancements in order to keep the consumer engaged and enhance the customer experience. Retailers should embrace strategies in which mobile, online and in-store experiences should complement, rather than compete with, one another. The firm also predicts that the first half of 2015 is likely to be dominated by uncertainty surrounding the general election. However, retail sales will receive a boost from a buoyant labour market, lower inflation on the back of the fall in oil prices. Slower but still positive house price growth will continue to support strong consumer confidence. But the retail market continues to be driven by structural change due to the growth of online shopping and profit margins for bricks and mortar retailers will continue to be squeezed by non-store sales and an increasingly internet savvy population. The news that the Chancellor in his Autumn budget will cap the inflation linked increase in business rates to 2% and undertake a full review of the structure of business rates is welcome news to the retail sector, according to the report. ‘However, fundamental changes need to be implemented going forward especially with consumer’s increasing preference to shop and buy online rather than in store,’ it adds. Continue reading
US home owners more confident than those who rent, new analysis suggests
Home owners in the United States are generally more confident than renters in their local housing market’s performance, according to the latest research from Zillow. But this confidence gap is widening in areas with rapid home value growth and narrowing in areas with more restrained growth, the firm says. Overall home owners have become more confident about their decision to invest in a home where home values in their area have increased more rapidly. By contrast, renters feel that they cannot escape renting and have lowered their aspirations for homeownership in areas where home values have increased more rapidly. Rapidly rising home values have powerful psychological effects on both home owners and renters and research has shown peoples’ expectations about the future are strongly anchored in recent experience. Rapid asset price growth can contribute to what has sometimes been labelled ‘irrational exuberance’, or overly optimistic and self-perpetuating positive feedback in price trends. Zillow’s Housing Confidence Index (ZHCI) is designed to be a forward looking measure of housing market health by gauging the beliefs and aspirations of home owners and renters towards the future state of the housing market. There are two groups, those that have experienced rapid recent home value growth in excess of 9% annually between July 2013 and July 2014, when the survey was last conducted, and those that have experienced more restrained growth of less than 9% over the same period. By this classification, nine metro areas have experienced rapid home value growth and in general, the ZHCI is higher for home owners than for renters. The firm says this is not surprising since, relative to renters, home owners typically have higher incomes and a more optimistic perspective about the economy and housing market. But as the economy has improved, the gap between home owners’ and renters’ confidence index levels has widened in metros where home value growth has been rapid, and narrowed in metros where home value growth has been more restrained. Home owners and renters have very similar perspectives on the overall housing market and the ZHCIs for both groups tend to move together. A larger improvement in outlook among renters is the primary driver of converging optimism levels in slow home value growth markets. But the opposite is true in markets where home values are growing more rapidly. In these markets, optimism levels are diverging. Because home owners’ wealth is largely tied to the value of their home, slower home value growth results in a smaller change in home owners’ housing market outlook. In markets where home values are appreciating at a slower pace, renters have become increasingly optimistic about their potential for future home ownership. The Home ownership Aspirations Index, which measures how optimistic owners and renters are about their future home ownership prospects, increased more for renters in slow growth markets than for home owners. But in markets where home values are rising rapidly, renters are becoming increasingly disillusioned, as they likely see the possibility for future… Continue reading
Annual house price growth slows across the UK, house price index shows
Most regions in the UK saw annual house price growth fall in 2014 taking the average price to £189,002, according to the latest Nationwide house price index. Across the UK as a whole prices rose by 1.1% in the final quarter of the year and are 8.3% higher than they were in the fourth quarter of 2013, the data also shows. This has fallen from 10.5%. The North of England was the only region not to see prices slow on an annual basis and London was again the top performing region for the second year running with prices up 17.8% over the last 12 months. It means that prices in London are now 35% above their 2007 peak with the price of a typical property in the city now at £406,730. Amongst the other English regions, the Outer South East and Outer Metropolitan areas continued to outperform, recording double digit annual growth rates. Yorkshire and Humberside was the weakest performing English region, with prices up 1.5% over the year while annual price growth in Scotland moderated to 4.2%. The Nationwide says that 72% of housing transactions in England should benefit from the new marginal stamp duty regime, based on the 2013/2014 pattern of transactions, with 27% paying the same and just 2% paying more. The data also shows that amongst England’s major towns and cities, St. Albans was the top performer, with prices up 24% year on year while Manchester was the worst performing city, with no price growth over the year. Northern Ireland saw an 8.1% increase in prices, although they are still around 47% below their 2007 peak. Wales was the weakest performing region in 2014 and saw annual price growth slow from 5% in the third quarter to 1.4% in the fourth quarter. A breakdown of the figures show that in Scotland Aberdeen was the best performing area, with prices up 12% on the previous year. Fife saw the weakest growth, with prices up 1%. In Scotland those purchasing properties above £254,000 between now and 01 April 2015 may benefit from the new Stamp Duty Land Tax (SDLT) regime ahead of the Land and Buildings Transaction Tax being introduced. Around 15% of purchases in Scotland in 2013/2014 were above this threshold, and the potential savings could be significant with the Nationwide estimating around £5,900 on average. It says this could encourage prospective buyers to bring forward their purchases. Wales saw a second consecutive quarter on quarter fall in house prices, with a 0.6% seasonally adjusted decline. The annual rate of growth slowed to 1.4%, making Wales the weakest performing region in 2014. Mid and West Wales was the best performing area, with prices up 7% year on year. Home buyers in Wales are set to benefit from the new stamp duty arrangements, with the tax payable on a typical home mover property currently £165,699 cut by around half to £814. While around 45% of transactions in Wales are exempt from stamp duty due to… Continue reading
