Investment
UK commercial property investment return falls slightly
Total return on investment in UK commercial property fell to 1.2% in July from 1.3% in June, according to the latest CBRE Monthly Index. July’s fall was mainly a result of weaker performance from central London, but despite this monthly fall, over the last 12 months rental value growth in central London offices has now reached a post-recessionary high of 9.65%. Overall rental and capital values continued to grow in July, but did so at a reduced rate, with rental values growing at 0.3%, slower than the 0.5% for June, and capital values growing at 0.7%, down from 0.9% the previous month. The office sector was one of the biggest movers in July. While the market recorded another month of good performance, after a strong second quarter, July’s returns fell from 1.8% in June to 1.3%. The report says that this was largely down to the central London market, where total return fell to 1.1% from 1.7% the month before. Total returns were also down in outer London/M25 and the rest of UK, but not to the same extent as in central London. Overall, however, the central London office market is booming. Annual rental growth for the 12 months to July 2015 is now at a post-recessionary high of 9.65%, overtaking the previous peak in the year to October 2011 of 7.13%. Central London offices now have the highest rental growth of all UK commercial property markets over the last 12 months, driven by 12.48% growth in the City, and 10.52% growth in Midtown. ‘Despite the slight dip in July, office rents and capital values in central London market have been growing strongly over the last year. As a result of this performance, investment into the market has grown from £2.4 million in in the first quarter of 2015 to £4 million in the second quarter,’ said Michael Haddock, senior director of CBRE. ‘The high level of competition for central London assets means that investors, both local and foreign, are increasingly looking at opportunities in the rest of the UK and activity has been growing at an even faster rate outside London,’ he added. High street shops and industrials also recorded positive rental growth, but with some marked geographical divergence across the UK. In both sectors, the South East outperformed the rest of the UK. Rental value growth for high street shops increased from 0.2% to 0.5% in the South East, while rental values for the rest of the UK were flat for the month. Similarly, the industrial sector recorded 0.7% rental value growth in South East up from 0.5% the month before, while the growth rate fell in the rest of the country from 0.4% to 0.2%. Continue reading
Asking prices up slightly in UK with London forging ahead
Average asking prices in England and Wales increased by 0.6% in England and Wales in July while in Scotland there was no change month on month, the latest index shows. London prices increased the most, up 1.5% month on month and 12.5% year on year. In England and Wales the annual price growth was 6.2% and in Scotland it was 3.6%, according to the date from Home.co.uk. This takes the average asking price in England and Wales to £281,497 but in London it is £525,145. In Scotland it is £167,680. The data also shows that the supply of property for sale has fallen across the UK, down by 10% year on year and the South East remains the UK’s fastest regional market, with a typical time on market of 61 days. The UK property market continues to enjoy considerable momentum despite talk of mortgage rates rising in the near future, according to Doug Shephard director at Home.co.uk. He pointed out that a combination of buyer demand and short supply is driving prices higher, but at a lesser rate than last year. ‘The supply crisis is becoming more acute, and July recorded the lowest number of properties entering the market for that month since the onset of the financial crisis. Lack of supply is felt most keenly in London and the East of England, where the volumes of properties entering the market are down 23% and 16% respectively,’ said Shepherd. ‘These and other southern regions are clearly sellers' markets and prices are firmly on an upward trajectory. Marketing times in the South East continue to be the lowest in the country. Indeed, across the nation, marketing times are currently around the lowest we have witnessed since 2008,’ he added. He explained that buyer demand coupled with low numbers of properties entering the market has led to a significant reduction in the total stock for sale. The number of properties on the market in England and Wales is 11% lower than in August last year and 39% less than in August 2007. ‘Hence in the southern regions, where supply problems are most acute, buyers have only half the choice that was afforded to them eight years ago. Ultra low interest rates and other stimulus measures have ensured that more money, largely new debt, is chasing ever fewer properties,’ Shephard said. Whilst national supply levels are at an all-time low and trending down, a more detailed regional analysis of supply shows how this key market driver varies across the nation. What is immediately evident is that those regions which have suffered the greatest reductions in supply over the last seven years have also shown the greatest price growth. Shephard pointed out that along with demand, supply is a key market driver with direct consequences for regional property market performance. London shows the biggest contraction in supply over the last eight years, of 69%. ‘For the buyer, this means that whereas before there were, say, 10… Continue reading
UK housing repossessions continue downward to record low
Residential property repossessions in the UK, already at their lowest since records began, continued to fall in the second quarter of 2015, according to latest data to be published. In that period, the repossession rate was 0.02%, equivalent to just one in 5,000 mortgages and the data from the Council of Mortgage Lenders also shows that arrears continued to fall as well. Overall there were 2,500 properties taken into possession in the second quarter, down from 3,000 the previous quarter and 5,400 in the second quarter of last year. Of these, 1,800 were in the owner occupier market, and 700 in the buy to let market. However, the CML report points out that as in the first quarter, the current flow of repossessions probably continues to remain lower than the underlying trend would imply, even though arrears are also falling. In terms of arrears, the total number of mortgages with arrears equivalent to 2.5% or more of the mortgage balance was 106,400.This equated to 0.96% of all mortgages, again, the lowest rate since quarterly records began in 2008. CML director general Paul Smee pointed out that this is the first quarter in which the CML has been able to publish fully consistent data on arrears and possessions across both the owner occupier and the buy to let markets. As a result of improvements to the underlying data surveys, some back data has been restated. Of all loans with arrears of more than 2.5% of balance some 100,700 were owner occupier and 5,700 buy to let. In both the owner occupier and buy to let markets, the number and proportion of mortgages in arrears fell or remained static in all arrears bands and none experienced a worsening. Continue reading
