London
Index shows UK prices increased by just 0.3% in February
Residential property prices in the UK increased by 0.3% in February and there was a slight growth taking the annual increase to 4.8%, the latest house price index shows. This took average prices to £196,930 and overall the annual rate of growth has remained between 3% and 5% since the summer of 2015, according to the data from lender the Nationwide. The index report also says that the number of mortgages approved for house purchase increased sharply in January to almost 75,000, up from around 71,000 approvals in December and the highest number since January 2014. However, Nationwide’s chief economist Robert Gardner pointed out that much of the increase is likely to be related to the impending increase in Stamp Duty on second homes which is due to take effect in April 2016. He pointed out that after declining gradually over the past 12 years, the rate of home ownership in England stabilised in 2014/2015 but at 63.6%, this is well below the peak of 70.9% recorded in 2003. ‘This is likely to have brought forward a significant number of purchases, which in turn will probably result in a fall back in approvals during the spring/summer. Looking through this volatility we expect the underlying pace of activity to increase in the quarters ahead as improving labour market conditions and low borrowing costs provide ongoing support,’ he said. Gardner pointed out that after declining gradually over the past 12 years, the rate of home ownership in England stabilised in 2014/2015 but at 63.6%, this is well below the peak of 70.9% recorded in 2003. ‘If we look at the shift in tenure patterns by age over the past decade, we see a particularly marked decline in home ownership rates amongst the younger age groups, especially amongst 25 to 34 year olds, traditionally the segment containing most first time buyers. While there was a marginal uptick in 2015, the proportion of younger adults who own their own home, currently 37%, remains considerably lower than 10 years ago,’ he explained. ‘Over the same period, the proportion of people renting increased from 43% to 63%. For 16 to 24 year olds, the proportion renting increased from 73% to 92% over the same period. The increase has occurred in the private rental sector, which currently houses 19% of total households. Over the past 10 years, the number of privately rented households has increased by 75% to 4.3 million,’ Gardner said. He also pointed out that the latest English Housing Survey showed that the proportion of private renters who expect to buy a home at some point in the future declined from 61% to 57%, the lowest reading since the survey began in 2008/2009. Even amongst those who expect to buy a home, for most this remains a longer term aspiration, with 75% expecting it to take at least two years. March is likely to be similar in terms of house prices and sales, according to Alex… Continue reading
Bristol and Cardiff set to see largest rises in office rents in UK
A lack of supply of Grade A space in the UK’s regional cities is currently driving significant demand for value-add office refurbishment opportunities, according to new research. With average take-up across the UK’s regions at 4.6 million square feet, with availability currently down 18% on 2007 levels, there is under a year’s supply of Grade A space coming to the market in the next three years says the outlook report from real estate firm Savills. It explains that speculative development in the regions has risen 129% on the same time last year to approximately 3.5 million square feet, but with 28% pre-let it is expected that this will largely be absorbed in the first and second quarters of 2016. Savills says that the lack of available space has driven demand for value-add office opportunities to help plug the gap, with January 2016 marking the 41st consecutive month of refurbishment activity. With competition for space outstripping supply, the gap between the rents on new build space and the best quality refurbished stock has narrowed, although it is likely to widen once more as new developments are completed later on in the year. New build office rents in Bristol, for instance, currently stand at £28.50 per square foot compared to £27 per square foot for refurbished office space, whilst in Leeds new build rents of £27 per square foot are only £1 higher than those for refurbished space at £26 per square foot. Savills forecasts that Bristol will see the highest growth in rents of 12% by the end of 2016, followed by Cardiff at 9%. The lack of supply has also forced some occupiers to look outside CBD’s at business park locations. Savills gives Birmingham Business Park as an example which has seen its vacancy rate drop from 75 to 15% over the last 12 months. ‘UK wide job creation is driving demand for good quality space in amenity-rich and well-connected regional cities, leading to a squeeze on space and rent rises. By the end of 2015 rents in the M25 office market had risen 10%, Manchester by 6% and Leeds 4%, and we’re set to see strong rental growth in many other regional markets before 2016 is out,’ said Claire Bailey, associate director, Savills commercial research. ‘While speculative development has picked up pace, a lot is already pre-let so we’re going to see a pinch on new build towards the end of 2016 and into early 2017 when occupiers are going to have little choice but to turn to refurbished stock or possibly even pre-letting to meet their requirements,’ she pointed out. Savills reports that in the past year regional offices prime equivalent yields have moved in by 50 bps to 4.75%. The proportion being invested in office markets outside London has also risen over the last two years, with regional volumes in 2015 standing at 31% of market share, compared to just 16% of total… Continue reading
UK house prices dipped in February but longer trend is still upward
House prices in the UK in the three months to February were 3% higher than in the previous three months whilst the annual rate remained unchanged at 9.7%, the latest index shows. But month on month prices fell by 1.4%, according to the data from the Halifax, taking the average price of a home to £209,495. Martin Ellis, Halifax housing economist pointed out that overall prices continue to rise at a robust pace driven by a significant imbalance between supply and demand. ‘Whilst this position is likely to continue over the coming months, there are some tentative signs that the supply situation may be beginning to improve,’ he explained. He also pointed out that instructions for second hand properties coming up for sale have increased in the past two months and the level of house building increased significantly in 2015. ‘Further ahead, increasing affordability issues, as house price increases continue to exceed wage growth, are likely to curb housing demand and cause price growth to ease,’ he added. An analysis of the Halifax figures shows that the quarterly rate of change was the highest since June 2015 when it was 3.3% and the annual rate remains within the 8% to 10% range where it has been for nearly the entire period since the start of 2015. The fall in values in February offset much of January’s 1.7% rise but Ellis explained that monthly house price changes can be volatile and the quarter on quarter change is a more reliable indicator of the underlying trend. The increase in average house prices has exceeded total average employee’s net earnings in 28% of local authority districts across the UK, some 108 out of 380, over the past two years, according to recent Halifax research. According to Russell Quirk, chief executive officer of eMoov, the monthly figures could be seen as a sign that the UK market is cooling but the longer term trend is still upward. ‘Demand is always an influential factor where an increase in house prices is concerned, so the impending stamp duty changes due in April have no doubt helped to keep the UK market buoyant,’ he said. ‘There has been a flurry of buyers keen to secure that second home or buy to let investment before the April deadline, as well as an increase in the stock available, due to savvy buyers looking to cash in and obtain a higher price than usual during this period of high demand,’ he pointed out. ‘We expect once the stamp duty dust has settled the market will cool slightly, but whilst UK and foreign buyers are still fuelling this increase, the issue of affordability will continue to take a back seat, rather than helping to restrain a continually inflating market,’ he added. Continue reading
