Investment
Prime property market in UK remains subdued but growth is forecast
The top end of the UK property market remains difficult at present but the prime central London sales market saw a quarterly rise in the second three months of the year, new research shows. Overall sales in the prime central London market increased by 24% compared to the first quarter of 2015, according to the latest data from estate agent Strutt & Parker. However, when compared to the same period last year, the results are less positive, down by 9% on the second quarter of 2014. The data also shows that properties over £2 million are 27% down in terms of the number of transactions in the same period last year, but 40% up on the first quarter of 2015. Properties under £2 million are 1% down on the second quarter of 2014 and 20% up on the first quarter of 2015. Strutt & Parker is forecasting price growth of 2.5% in the prime central London market overall in 2015, and in the medium term, the outlook for 2016/2018 remains for 6% growth per annum. For the UK as a while it expects growth of 5% in 2015, rising to 6% in 2016, followed by 7% for 2017/2018. ‘The increase to stamp duty, along with the general election uncertainty and the recent changes to non-dom status, have meant that individuals have been more hesitant with purchases as they seek additional advice,’ said Charlie Willis, head of London residential at Strutt & Parker. ‘However, this has not stopped buyers purchasing our highest quality stock as prime central London remains a very attractive place to live,’ he added. Continue reading
Mortgage lending in UK up 9% month on month
Gross mortgage lending in the UK reached £22 billion in July, some 9% higher than June when it was £20.1 billion, according to the latest data to be published. The figures from the Council of Mortgage Lenders, which represents over 90% of home lenders, also shows that it was 14% higher than July last year and the highest monthly figure since gross lending reached £23.6 billion in July 2008. Mohammad Jamei, CML economist, explained that although it is the highest monthly total for seven years, it is in line with the CML’s expectation that lending would strengthen in the second half following subdued activity earlier in the year. ‘We expect lending activity in the rest of the year to be underpinned by improving economic fundamentals, but kept in check as any upward pressure on house prices further stretches affordability for some buyers,’ he said. ‘Today’s data is in line with our forecast that gross lending will rise to £209 billion this year, 3% higher than in 2014,’ he added. John Eastgate, sales and marketing director of OneSavings Bank, believes that fears that the Bank of England was gearing up for an interest rate rise caused an uplift in re-mortgaging in July, as home owners raced to refinance before the cost of borrowing rises. ‘We’ve seen continued resilience in the buy to let market in spite of the tax changes announced in the Budget, and this has underpinned wider lending growth. However both last week’s Monetary Policy Committee minutes and the current weight of low inflation seem to have pushed back rate rise expectations into next year, so mortgage rates should remain historically attractive for longer,’ he pointed out. He warned that it is not all plain sailing. ‘House prices are still on upward trajectory, which is doing nothing to take the sting out of entering the market for buyers. Unless serious commitments are made to build more homes, the supply deficit will continue to move the property ladder out of reach of those struggling to find a firm footing, causing greater long term reliance on the private rental sector,’ he said. Henry Woodcock, principal mortgage consultant at IRESS, also believes that increased fears of an imminent base rate hike have boosted the remortgage market, causing many borrowers to consider moving onto fixed rates mortgages, and therefore buoying activity. ‘While total lending is unlikely to hit the CML’s initial full year forecast of £222 billion, we expect a strong level of lending in the final part of the year. Now that the prospect of an imminent base rate hike has receded somewhat, historically attractive rates will be available for longer, supporting buyer demand,’ he said. According to Peter Williams, executive director of the Intermediary Mortgage Lenders Association (IMLA), affordability checks designed to promote responsible lending are set to bite harder as the market grows and this suggests there is little prospect of activity growing unchecked, especially as the… Continue reading
Wealthy Chinese looking to invest more in London prime property
Chinese investors, particularly those from the mainland are set to become the biggest group of investors in London with a relaxation of the amount of money that can be moved overseas due to be implemented soon, it is claimed. The changes in the stock market may also play a key role as wealthy Chinese investors turn away from their domestic market to explore new investment opportunities overseas, says upmarket estate agent Harrods Estates. Typically Chinese spend up to £2 million on a new off plan development in London, however the firm believes this will change with buyers from China looking at investing from £2 million to £50 million in real estate. ‘There is a huge amount of wealth in China and although we have started to see investment in London property in the last five years, the focus has been on off plan new build developments ranging from £500,000 to £5 million,’ said Simon Barry, head of new residential developments at Harrods Estates. ‘This is just the beginning of a vast amount of wealth from China and we expect this will increase dramatically over the coming years, when Chinese billionaires will look to spend anything from £5 million to £50 million,’ he added. Over the past two decades, wealth generated by China’s rate of economic expansion has flowed into Hong Kong and Singapore through corporate investment, much of which has fuelled the demand for London property. Harrods Estates has seen investors from Beijing, Shanghai, Hong Kong and Singapore, with mainland China still untapped due to an initial focus on the domestic property markets. This is now set to change as a handful of developers and estate agents explore the opportunity to reach out to mainland China, where there has not been direct to overseas property markets. ‘We expect to see more high level Chinese executives finding time to travel to London and other international centres, seeking out new markets and new opportunities outside of China,’ said Barry. He pointed out that at present there are capital controls in place restricting potential Chinese purchasers taking out US$50,000 per year, however a revised version of the Qualified Domestic Individual Investor programme (QQII 2) has recently been announced although it has yet to be implemented. ‘The programme will be open initially to anyone working in six major cities with assets in excess of circa US$160,000, and will allow them to export up to 50% by value of their net worth. For corporate investment the capital limit would rise significantly to US$1 Billion,’ he explained. He believes that China’s slowing economy and its recent stock market crash, which saw the Shanghai Composite Index lose 30% in value over a three week period in the middle of June and a further plummet in value in late July, will actually encourage investors to look at other opportunities. According to the firm one of the primary motivators for Chinese… Continue reading
