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Industrial building driving UK construction growth, latest RICS survey shows
Industrial building is driving construction growth in the UK and the country’s office and industrial sector rents are expected to rise as their fastest rate since 1998 in the last quarter of 2014. Indeed, the UK has seen a sixth consecutive quarterly fall in office space availability nationwide with the decline at its fastest pace since the late 1990s according to the latest Commercial Market Survey from the Royal Institution of Chartered Surveyors (RICS). It also shows that the rise in transactions of commercial properties being sold with Permitted Development Rights (PDR) appears to be compounding the lack of availability, with two thirds of respondents to the survey suggesting that if PDR exemptions are not extended then availability of commercial properties will be impacted further. In London, 20% of respondents said PDR transactions had led to more than 10% of available commercial properties being earmarked for conversion into residential use and a net balance of 51% of surveyors reported a rise in demand for office, industrial and retail space. Across the whole of the UK, 32% more surveyors said availability across office, retail and industrial properties had fallen, while demand had risen to a net balance of 44%. RICS says it is significant that demand for industrial property grew on the previous quarter from a net balance of 49% in the second quarter to 56% in the third quarter and surveyors in London also saw a large rise in prospective overseas investors in the industrial sector of 73%. The picture across the UK appears increasingly upbeat, with the firmer tone spreading beyond the capital as the economic expansion gains greater traction. This is being reflected in rental expectations which are now in positive territory in all parts of the country in the office and industrial sectors. Retail remains something of a laggard with a flatter rental trend away from the more dynamic parts of the market. For the next 12 months a net balance of 71% surveyors are forecasting an increase in rent levels in London across all segments of the market, compared to 36% in the North of England. ‘The third quarter results provide further evidence that the economic expansion is becoming more broadly based with tenant demand for space picking up in all parts of the country and the need for landlords to provide inducements diminishing,’ said Simon Rubinsohn, RICS chief economist . ‘There are also now clear signs that investors are casting their nets wider in a bid to find better value in the market following the steep drop in yields on prime property in the capital,’ he added. He also pointed out that while permitted development rights is helping in a small way to boost much needed housing supply, the latest survey suggests that it is also having the unintended consequence of contributing towards a shortfall of office space in some parts of the country. ‘Feedback from members suggests that this is particularly marked in London and adding to the upward pressure on rents. Moreover, there is… Continue reading
Australian housing market weaker outside of larges cities, latest index suggests
Residential property values across Australia’s capital cities increased by 1% over the month of October, according to the latest RP Data CoreLogic index. The data highlights that despite a slowdown in growth in September, values continued to rise, increasing by 2.2% over the past three months. Although combined capital city home values were up by 1% not all cities saw increases. Only Sydney with an increase of 1.3%, Melbourne up 1.9% and Brisbane at 0.6% actually recorded value rises over the month. According to Tim Lawless, head of research, this result highlights weaker housing market conditions outside of Australia’s largest cities. Looking over the past three months Sydney, Melbourne, Brisbane and Adelaide, which happen to be four of the five largest capital cities, were the only capital cities to record an increase in home values. Sydney leads the growth with home values increasing at a rate of more than 1% a month, up 3.9% over the past three months. Lawless said that Perth and Canberra have clearly moved through the peak of their growth cycles. However, the greatest value falls over the last three months were recorded in Hobart with a decline of 2.8% and Canberra where values were down 2.4%. ‘Looking at the increase in home values over the 12 months to October, it is clear that the rate of capital growth is continuing to moderate. Despite the annual rate of value growth slowing, all capital cities have still recorded an increase in home values over the past year,’ said Lawless, He pointed out that home values across the combined capital cities have increased by 8.9% over the 12 months ending October 2014, which has slowed from a peak of 11.5% in April of this year. Sydney, and to a lesser degree Melbourne, continued to be the main drivers of the increase in home values. Over the past year, Sydney home values were 13.1% higher, while Melbourne values were up 8.9%. Brisbane was the third best performing capital city for value growth over the year with values up 5.6% followed by Darwin where values rose by 5%. Elsewhere, value growth was more subdued with increases of 3.4% in Perth, 4.3% in Adelaide, 4.4% in Hobart and 0.9% in Canberra. ‘Despite the fact that the annual increase in home values is slowing, other indicators remain strong,’ added Lawless. Auction clearance rates continued to hover around the 70% mark week to week while volumes across RP Data real estate agent and valuation platforms remained strong which is indicative of heightened levels of industry and mortgage market activity. The number of new properties listed for sale continues to rise as are total listing numbers. However, Lawless said that the fairly rapid rate of sale is resulting in a slower increase in total listings than new listings. Conditions across capital city rental markets remained subdued, with weekly rents rising by only 1.8% over the past 12 months, the lowest annual change in capital city rents since the year ending August 2003. According to Lawless, the consistent… Continue reading
Research reveals which home improvements yield best return on investment
The average home improvement in the UK would add a healthy 10% to the value of a home, based on home owner’s estimates, new research shows. This works out at just under £30,000 whilst the average return on investment was estimated to be 80%, based on the total amount spent by home owners, according a new home improvement index from peer to peer lending firm Zopa. The new research, which asks home owners who have recently taken out a home improvement loan across the UK how much value their renovation added to their property, shows that the top improvement is a conservatory costing an average of £5,300 and giving a 108% return on investment. Next is garden improvements costing an average of £4,550 giving an 88% return followed by exterior work costing an average of £6,000 with a return on investment of 75%. An extension is much more costly, averaging £19,750 but only offering a 71% return on investment while a new roof costs £4,150 with just 63% return and a loft costing an average of £24,600 but comes with a return of just 50%. Kitchen and bathrooms are often the rooms home owners want to change the most but they offer the least in terms of returns. A bathroom renovation costing an average of £4,900 is bottom with a return of just 48%, closely followed by a kitchen costing an average of £9,600 with a return of 49%. Some 82% of home owners said that despite improving their homes, they were not planning on selling soon. The firm says this suggests that the current housing market where price growth is slowing could be putting home owners off moving, and instead adapting their current homes to their situations. ‘With the latest housing market reports showing the market to be slowing down, home owners could add significant value by looking at ways to improve their current homes, rather than move,’ said Zopa chief executive officer Giles Andrews. ‘With record low rates on borrowing, home improvements can be a cost effective way to add value to your property for the long term,’ he added. Continue reading
