TSI
Economic performance drives UK property markets, not elections
The upcoming general election in the UK has so far had a minimal impact on the country’s property markets as the economy is the more significant driver, it is claimed. Periods of strong economic growth coincide with strong office take-up and the correlation between property related decisions and timing of general elections is negligible, according to a new report by commercial property and real estate services advisor CBRE. ‘Conventional wisdom suggests that property markets slow as a general election approaches. Elections are uncertain, with the forthcoming election more uncertain than most,’ said Miles Gibson, head of UK research at CBRE. ‘However, the data shows that the property market is actually very resilient in the run-up to an election, with little observable change to the overall behaviour of the market, except where a detailed policy has already been proposed, such as the mansion tax,’ he explained. ‘There is little, if any, evidence of UK general elections having any overall impact on property investors or occupiers, the pace of planning decisions, or house prices. This may be because Party manifesto policies on property are typically very general and, where they are specific, they take time to be implemented,’ he added. Using data from the past 30 years, the report says there is little evidence to suggest that general elections cause a slowdown in the central London office investment market. In the last 30 years, there have been six general elections, all of which took place in the second quarter of the year. Second quarters tend to be quieter than the quarterly average. This holds true for non-general election years as well as general election years. However, there were year on year increases in investment transactions observed in five out of the six general election quarters in the period suggesting that the traditional weakness of second quarters is due to seasonal factors unrelated to the occurrence of general elections. The report points out that the central London investment market is very strong at present. With latent demand undoubtedly robust, the strength of the market in the first half of 2015 will be driven by the availability of stock rather than the election outcome. As evidence, it says that commercial occupiers in central London seem undeterred by the forthcoming general election as evidenced by the 15 million square feet leased during 2014, the highest annual total since 2006. It also says that against a backdrop of robust economic and strong office based employment growth, demand for office space will not diminish because of an impending election. This is already reflected in an above average level of space under offer and a high level of active requirements, suggesting that 2015 will be yet another good year for leasing activity. The report also argues that there is no discernible negative impact at a national level in the residential sector on either the mortgage market… Continue reading
UK landlords report lowest void periods in 2014
The average void period experienced by UK landlords fell in 2014 with the lowest recorded in the fourth quarter of the year, down to 2.6 weeks, the latest sector survey shows. This was down from 2.8 weeks in the fourth quarter of 2013 and void periods have now not risen beyond 3.5 weeks over the past 13 years, according to the quarterly survey from specialist buy to let lender Paragon Mortgages. The first quarter of the year saw the average void period remain at 2.8 weeks then it dropped slightly to 2.7 weeks in the second quarter and returned to 2.8 weeks in the third quarter before falling again in the final three months of the year. Void periods have remained low over the period of the survey, averaging between 2.6 and 3 weeks since 2001. The lowest recorded void period was 2.5 weeks in the fourth quarter of 2002, and the highest at 3.5 weeks in the second quarter of 2010, which was during the peak of the financial crisis. ‘Although void periods have fluctuated slightly over the past year they have continued to remain low, peaking at 2.8 weeks,’ said John Heron, managing director of Paragon Mortgages. ‘It is encouraging to see that in the fourth quarter of 2014 void periods reduced to the lowest point recorded since 2012, only slightly above the lowest average void period reported by our research at 2.5 weeks,’ he pointed out. ‘The low average void periods we have seen over the past year, and in previous years, reflects the strong and growing demand we have seen for private rented property together with effective property management by landlords and letting agents in renting out properties,’ he added. ‘This is positive news for landlords and, as tenant demand continues to rise, it is possible that void periods may decrease even further in 2015,’ he concluded. Continue reading
Australian office markets see trend away from mining industries
Just over one million square metres was leased across Australia’s office markets in 2014 and the year saw a trend away from mining and its associated industries to the services sector. Non-mining sectors took at least 80% of the stock, while 35% of the space leased occurred in the Melbourne market, according to Savills Australia’s latest research. The report found of the 1,050,425 square metres of office space reported leased in CBD and suburban markets nationally, property and business services was the dominant sector leasing 29% of the stock. Other non-mining sectors including finance, government and IT, accounted for a further 50%, while the mining and utilities industry accounted for just 17% of the total. In the CBD markets, which accounted for just under 700,000 square metres, the property and business services sector leased 33% of the stock. The Melbourne market, which is dominated by the service sector, took the majority of space with 35% of the national total. Savills national head of research, Tony Crabb, said the figures underscored the trending shift away from mining and associated industries to the service sector. ‘These are the sort of figures that we expected given the end of the mining investment boom with Melbourne and Sydney leading the way and Perth and Brisbane struggling to adjust to the new status quo,’ he explained. ‘It’s a good news story for Sydney and Melbourne and not so good for Perth and Brisbane, but it’s important to note that this is a cyclical rather than a structural phenomenon and one which the mining states will recover from just as Sydney and Melbourne are now doing,’ he added. Crabb expects vacancy rates to reflect the fluctuating fortunes of the markets with the non-mining states recording minimal change on last year’s figures while Perth and Brisbane struggled with vacancy rates of around 12% and 14%. He pointed out that given the stronger leasing trend, incentives in the Sydney and Melbourne markets were likely to come off post global financial crisis highs, but would remain high in Perth and Brisbane. He also expects some tightening in vacancy rates would also come from withdrawal of stock. ‘We forecast an increase in the amount of occupied space with up to 700,000 square metres of space is expected to be withdrawn, leading to a tightening in the vacancy rate in some CBD’s, especially for prime buildings as upgrade activity accelerates,’ said Crabb. ‘As for incentives, they are mostly paid for by higher face rents. In Sydney, where the incentive has risen from 20% to over 30%, face rents have grown by more than the value of the incentive, this is also the case in Melbourne, Perth and Adelaide with Brisbane the exception,’ he commented. Continue reading
