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US housing market likely to see more pressure on prices
Housing starts in the United States rose in September, driven by the multifamily sector, but completions are not matching that hot pace, especially for lower end homes. With demand rising but supply in the form of completions slowing, there will be more pressure on home prices to rise, according to the latest analysis report from real estate firm CoreLogic. The implications are likely to be particularly felt at the low end of the property market due to the Federal Housing Administration’s decision in January to cut mortgage insurance premiums by 50 basis points, it points out. Overall starts are up 18% since last September, driven by multifamily, which saw strong growth of 29%, the data shows. Completions, though, the number of units actually delivered, rose by only 8% year on year, or less than half the jump in starts. Multifamily is the driver in this sector too, up 20% from September of last year. ‘The number that should give the market pause, though, is the completions on one-unit structures, both attached and detached. They are up only 3% and they are the most important segment to look at. They significantly lag the one unit structure starts number which were up 12% year on year,’ the report says. ‘Since it takes six months to deliver a house after ground breaking, completions is the actual new supply that is ready to be sold. What that means for home sales is definite upward pressure on home prices,’ it explained. The report also points out that since the FHA made its premium cut, the prices for lower end houses have jumped and the FHA is a big presence in the low end market where houses typically sold for 75% or less than the median. As of August, real prices for lower end houses have jumped 10.4% relative to a year ago. Prices for higher end homes have been up as well, but only half as high at 5.2%. The lower end prices, which had been up in a narrow range of around s7% the last half of last year, really took off starting in January. ‘The real trend to watch here is if one unit completions will rise to match what is a re-acceleration of demand on the low end. If demand for homes to buy outstrips supply, prices will inevitably rise even higher,’ the report concludes. Continue reading
Rents in prime Home Counties market in UK down 0.8% in third quarter
Prime rents in the English Home Counties fell by an average of 0.8% in the third quarter of 2015 despite robust activity levels but are up 4.1% year on year, according to the latest data. The prime rental market in these counties around London, tends to be very seasonal and the three months leading up to September are often among the busiest of the year as tenants look to complete moves before the new US and UK school terms start in August or September respectively. This year was no exception, according to the index report from international real estate firm Knight Frank, with the number of tenancies agreed in the three months to September 54% higher than over the preceding three month period. But while activity levels have been robust, rising stock levels across the prime market, have meant that some landlords have been willing to reduce asking rents slightly in order to remain competitive, according to research executive Oliver Knight. ‘As ever, demand from individuals relocating for work continues to form a significant proportion of the market, especially in the prime commuter hotspots of Ascot, Cobham and Esher where corporate tenancies accounted for 42% of all deals agreed over the three month period,’ he said. ‘This corporate demand for rented accommodation has been particularly strong from individuals working in the technology sector. The share price of technology businesses has performed well this year, especially when compared to the banking and oil and gas industries,’ he added. He pointed out that the market continues to attract international tenants with some 38% of new renters across the prime Home Counties market coming from outside of the UK between July and September in Ascot, Cobham and Esher where corporate tenancies are more prevalent this rises to 51%. Individuals from North America were the most active movers during this time, with the start of the American school term in August likely to have been a factor. Continue reading
UK rental market sees sharp rise in demand for one bed flats
Rent rises for one bedroom flats in the UK accelerated sharply in September, sparked by high demand from recent graduates renting to live near their first job, new research has found. Rents for one beds saw an annual rise of 3.9%, from 2.9% in August, reaching an average of £1,054 according to the monthly Landbay Rental Index. The new index, which launched last month, is the first to track rental trends to the county and London borough level in combination with the number of bedrooms. Edinburgh with a rise of 12%, Swindon up 11% and Southend on Sea also up 11%, saw the biggest rises in rents for one bed flats, albeit from lower average rents than some of the other areas to see big year on year increases. The index also shows that rents for three bed properties are seeing the biggest overall rental rises, up 4.8% year on year to £1,489 in September. Across all properties, UK rents rose by 3.7% in the last year to an average £1,288. This was the first increase in annual growth since February, when the average monthly rented price was £1,277. ‘The upward trend in UK rents can simply be explained with one word, jobs. The UK’s job market is going from strength to strength and the rental market is staying hot on its heels,’ said John Goodall, chief executive officer of Landbay. ‘The sharp seasonal jump in rental growth for one beds reflects a buoyant graduate job market as people move to their first job. Flexibility and freedom is the order of the day for first jobbers, and one bedroom flats offer the perfect springboard to take the plunge into full-time working life. One bed flats are also popular for couples and young professionals who don’t want to flat share,’ he explained. ‘Higher housing costs can be a nightmare for tenants when other costs are rising and their wages are stagnating. Fortunately these rent increases come at a time of growing wages and falling costs, according to the latest inflation figures, so while they may not be welcome they don’t leave the same dent in consumers’ pockets,’ he pointed out. ‘For potential investors, these rental figures show how resilient residential property is as an asset class, even when you have unusual economic forces combining like the current mix of low inflation, low interest rate, and high wages,’ he added. Across all property sizes, the top rental risers outside of London were in the southeast, with all but two of the top 10 rental risers of Swindon and Edinburgh, clustered around London. By contrast only one of the top 10 rental fallers, Buckinghamshire, was located in the southeast. According to Joe Macklin, director of index compilers MIAC, there is likely to be a small decline in data volume in the run up to… Continue reading
