TSI
Madrid set to outperform other European office property markets
There has been good news for the residential market in Spain with sales steadily increasing and now the country’s commercial property market, particularly in Madrid, is striding ahead. Over the next couple of years, Madrid is forecast to be one of the best performing European office markets, after staging a strong recovery, according to the latest analysis from Knight Frank. This change reflects the much improved economic backdrop, providing occupiers and investors with renewed confidence and optimism. Historically, the Madrid office market has correlated closely with corporate performance and employment levels. Prime rents reached their floor in 2013 and increased by 14% in the first half of 2014, to currently stand at €28 per square meter per month. Office investment has risen sharply, with volumes amounting to €700 million in the first half of 2014, compared with €400 million for the whole of 2013. The report points out that there has been limited development over recent years, which has helped to stabilise the vacancy rate at 11.5%. With limited development in the pipeline, a shortage of good quality stock is expected in the medium term, which is expected to lead to further rental growth. An increasing number of companies are looking at relocating; having delayed their expansion plans throughout the recession which adds weight to the view that increasing demand will further boost take-up over the coming months. At a recent investor breakfast hosted by Knight Frank, a live opinion poll of the 200 attendees showed that Spain was year’s top target country for investment, chosen by 26% of the audience, knocking the UK off the top spot. Knight Frank says this is unsurprising given the strength of the rebound currently being seen in the Spanish market. However, the UK and Germany again featured strongly on investors’ radars, gaining 25.3% and 19.2% of votes respectively. ‘Overall office vacancy stands at 11.5%, however, Grade A supply in Madrid’s centre stands at just 2%. This, coupled with a 25% increase of take up year on year, will lead to significant rental growth in the capital,’ said Humphrey White, head of commercial, Knight Frank Madrid. ‘We are also seeing a polarisation of the office market as tenants become more demanding, leading to a flight to quality, the best within the CBD dramatically outperforming others in the immediate surroundings,’ he added. According to Darren Yates, global head of capital markets research, Knight Frank, as 2015 approaches, the combination of a more active occupier market, limited development pipeline and low rents offers a realistic prospect of strong rental growth. ‘In turn, this will further increase Madrid’s appeal to investors, leading to yield compression and enhanced growth in capital values. The investment case for Spanish property is compelling,’ he said. Continue reading
UK mortgage lenders braced for further interventions despite market growth cooling
Mortgage lenders and brokers expect further interventions by the Bank of England’s Financial Policy Committee (FPC) despite market growth cooling, according to new research. According to the latest survey by the Intermediary Mortgage Lenders Association (IMLA) some 55% of intermediary mortgage lenders and 40% of brokers are expecting further intervention. The findings come as the first FPC recommendations; the interest rate stress test against a 3% base rate increase for borrowers, and a 15% cap for lenders on the volume of new loans above 4.5 times loan to income (LTI ), take effect across the mortgage market this month. IMLA’s research reveals lenders and brokers are in agreement that the 3% stress test will have the biggest impact of the two measures. Some 54% of brokers and 26% of lenders believe this will have a high impact, compared with just 34% of brokers and 11% of lenders who feel the same about the cap on high LTI loans. Following the implementation of the Mortgage Market Review (MMR) in April and the FPC recommendations in its Financial Stability Report in June, IMLA’s research found that industry optimism over the mortgage market recovery has cooled. Just 44% of lenders and 41% of brokers feel market conditions were improving in the third quarter of 2014, down from 100% of lenders and 90% of brokers in the first quarter of 2014. Just 3% of brokers felt conditions were worsening in Q1, but 45% took this view in the third quarter and the proportion that felt lending volumes were growing faster than expected dropped from 87% to 31% among lenders from the first to the third quarters and from 60% to 45% among brokers. Concerns remained over the housing market with the latest findings showing 31% of lenders and 38% of brokers believing house price growth was unsustainable, up from 13% and 25% in the first quarter. However, subsequent data from national house price indices show that the monthly growth of house prices has since slowed. ‘These findings show the industry is well aware that its recovery will be closely monitored in the interests of maintaining economic and financial stability. The announcement that the FPC is considering loan to value (LTV) limits shows it remains vigilant,’ said Peter Williams, executive director for the IMLA. ‘But recent changes, including MMR, have already had a calming effect on activity and the full effects are still to emerge. IMLA’s research has clearly shown that some would-be borrowers are not passing initial broker checks which have been tightened to fully reflect the lender assessments that follow,’ he explained. ‘While caution is needed for the good of consumers and the economy, this applies to regulation as well as lending. Market interventions have been reasonable to date, but an immediate push for further regulation would be excessive, especially when house price growth appears to be slowing,’ he added. Using credit policies to compensate for weak supply in the housing market can have a major impact on who can… Continue reading
Average rents in England and Wales hit all-time high
Average rents across England and Wales have reached a new all-time record high of £768 per month despite a slowdown in annual rises, the latest data shows. Rent rises increased by just 1.5% in the year to September, down from 2.4% in the year to August, according to the buy to let index from lettings agent networks Your Move and Reeds Rains. On a monthly basis September’s average rents are 0.8% higher than in August, representing a rise of £7 in absolute terms since the previous month. David Newnes, director of estate agents Reeds Rains and Your Move, said that historically rent rises have broadly tracked inflation and as the wider cost of living grows ever more slowly, so too has the cost of renting a home. ‘That said, autumn is always a busy period for the lettings industry, and this has been no exception. Looking ahead, it is likely that rents in most parts of the UK will have now reached their seasonal peak so as the market cools along with the autumn weather there may be opportunities for some tenants to pick up a favourable deal,’ he explained. ‘Landlords predict slower rent rises to continue for at least a year. The latest LSL Landlord Survey shows expected rent rises of just 1.8% over the next 12 months, below the target rate of inflation,’ he added. Newnes pointed out that another critical development in the rental market is the resurgence of demand in regions outside of London and the South East. ‘Regions with a new charge of economic growth, like the North West or East of England, have now led annual rental growth on an equal basis with the capital for most of this year. London’s rents were rising by 8% at the start of 2013 but are now climbing at around a quarter of that pace,’ he said. A breakdown of the figures show that rents in five out of 10 regions of England and Wales are higher than a year ago. The East of England has seen the fastest annual increase, of 3.1%, followed by the South West at 2.3% and London with a 2.2% rise in rents since September 2013. Meanwhile, rents in the West Midlands are now 2.4% lower than a year ago, followed by an annual fall of 2.3% in the North East and rents in Wales dropping 1.1% compared to September last year. However on a monthly basis none of the ten regions has seen rents fall. Between August and September the average rent in the South East rose by 1.8%, while the North West has seen a monthly increase of 1.4% and in the North East rents are now 1.2% higher than in August. By contrast, Yorkshire and the Humber has seen no change in rents since August, while the slowest monthly rent rises were seen in the East Midlands, up just… Continue reading
