Uk
Prime central London property rental values fall for first time since Feb 2014
Rental values in prime central London fell in July as stock levels held up while demand from the financial services sector became more subdued against a jittery global economic backdrop. The fall of 0.1% was the first decline since February 2014 and meant annual growth slowed to 2.9%, having peaked at 4.2% in May while prime gross yields were flat at 2.95%, according to prime central London index from Knight Frank. It explains that stock levels have been buoyed to some extent by a restrained sales market, where an increase in stamp duty for properties worth more than about £1.1 million has dampened activity and price growth. According to Tom Bill, head of London residential research at Knight Frank, as annual price growth has slowed to 2%, more property owners have opted to become landlords as they wait for the market to digest a succession of recent tax changes. He explained that this short term supply/demand imbalance means two things. First, tenants are shopping around more and securing deals has become more difficult for landlords, even after initial agreements are in place. Second, landlords have made it more attractive for tenants to remain in place, prompting higher renewal rates. ‘While seasonal demand from students has remained strong, corporate demand has become more muted despite some pockets of stronger performance,’ he said. The report points out that demand in the prime central London lettings market has traditionally been strong from the financial services sector but optimism among bankers fell sharply in the second quarter of 2015, according to a CBI/PWC survey. ‘Continued regulatory uncertainty means banks are scaling back spending plans and nervousness surrounds a possible UK exit from the European Union, the recent Greek crisis and Chinese stock market volatility,’ Bill said. ‘However, there are longer terms grounds for economic confidence, and the UK’s recovery was underlined by strong GDP figures in July. Furthermore, in an attempt to increase the appeal of London, Chancellor George Osborne plans to reduce the bank levy,’ he explained. ‘Meanwhile, Brevan Howard, one of world’s largest hedge funds, is reportedly moving senior traders back from Geneva to London, underlining the city’s dominance as a global financial centre,’ he added. Continue reading
Investment in Irish office property market sees record performance
Total returns from investment property in Ireland hit 6.3% in the second quarter of 2015, rising above the 4.3% returned in the first quarter of the year, new data shows. Offices continued to lead the market, returning 7.4% in the last quarter, and 37.7% year on year compared with 33.0% in 2014, another record performance figure for the office sector, according to the figures from the IPD/SCSI quarterly property index. Following a slight dip in the previous quarter, the higher returns for Irish offices stemmed mainly from a strong occupier market, with rental value growth at 6.1% in the second quarter far higher than for the other main sectors. The index report also says that rental growth is now firmly established as the key driver of office returns, taking over from the re-pricing that drove the office market recovery in its early stages, when investor confidence began to return. The 12 month return for Irish commercial property of 33.7% to the end of June 2015 was more than double that for the UK over the same period which was 16.7% according to the IPD UK monthly property index. ‘The index shows that it has once again been a very strong quarter for Irish office investments. That said, we have also seen an improvement in the industrial sector, with total returns rising 250 basis points over the course of the second quarter of 2015,’ said Colm Lauder, MSCI senior associate. ‘The prime retail sector recorded a significant pickup in rental performance during the second quarter, with market rents climbing by 4.4% on Grafton Street as confidence returns to the retail trade. Values on Ireland’s leading high street have grown by 49% in the last 24 months, although this still leaves values 62% off the 2007 peak,’ he explained. ‘Investment pricing on Grafton Street showed an equivalent yield of 4.5% at the end of June, a long way off the 2.6% level achieved during the boom years,’ he added. According to Pauline Daly, of the Society of Chartered Surveyors Ireland (SCSI) said that the increase in returns in the second quarter reflects strong activity levels in the market across all subsectors. ‘An interesting trend has been the change in transaction type in the second quarter from the large portfolio sales in the first quarter to a larger number of individual asset sales in the second quarter,’ she explained. ‘We are also seeing more investment spread to the regions, particularly in Munster, which is good news from a competitiveness perspective and a wider pool of investors involved in the market which is likely to ensure liquidity and continued growth in investment volumes for the rest of the year,’ she added. Continue reading
UK house prices creep up month on month and year on year
UK house prices increased by 0.4% in July and annual property price growth edged up to 3.5%, according to the latest residential index from the Nationwide building society. The monthly rise follows a slight dip of 0.2% that was recorded in June and takes the average price of a home to £195,621. While annual growth has increased from the 3.2% recorded the previous month. According to Robert Gardner, Nationwide's chief economist, after moderating over the past 12 months, there are tentative signs that annual house price growth may be stabilising close to the pace of earnings growth, which has historically been around 4%. ‘This would bode well for a sustainable increase in housing market activity, though whether this will be maintained will depend on whether building activity can keep pace with increasing demand,’ he said. He pointed out that the outlook on the demand side remains encouraging. ‘Employment growth has remained relatively robust in recent quarters, and, after a prolonged period of subdued growth, wage growth is also edging up. With consumer confidence buoyant and mortgage rates still close to all-time lows, demand for housing is likely to firm up in the quarters ahead,’ he explained. But he added that it remains unclear whether activity on the supply side will catch up with demand. ‘The number of new homes under construction has started to pick up, albeit from historically low levels, and further increases are required if a sustainable recovery in the housing market is to be maintained over the longer term,’ said Gardner. The July index report also reveals the effect of significant changes to the stamp duty paid on sales which were introduced six months ago, resulting in bunching relating to the new tax thresholds. Gardener explained that the old slab structure used to result in significant distortions with a clustering of transactions at the tax thresholds. Under that system, paying £1 more would result in significant additional stamp duty being due. For example, paying £1 over the £250,000 or the £500,000 threshold used to trigger an additional £5,000 of tax. ‘Even though the change to SDLT only came into effect six months ago, the impact on the pattern of transactions is already evident, with much less bunching of transactions around the £125,000, £500,000 and in particular the £250,000 price points,’ he said. ‘Moreover, based on the first six months of transactions data from the Land Registry, nearly 235,000 purchasers in England and Wales have paid less tax under the new regime, with an average benefit of around £1,800,’ he added. He pointed out that the benefits are greatest in the South of England where average house prices are higher. ‘We estimate that around 85% of transactions in London, the South West and South East have benefited from the changes, compared with around 55% in the North, Yorkshire and Humberside, and the North West of England,’ said Gardner. ‘However, we estimate that around 5,000 or 2% of purchasers paid more, two thirds of whom… Continue reading
