London
Shortage of up supply pushing up UK house prices
House prices are continuing to rise across the UK driven by an ongoing shortage of new properties coming on to the market, according to the latest monthly survey report. The report from the Royal Institution of Chartered Surveyors also shows that prices are rising at the fastest pace in East Anglia, the South East and the East Midlands. However, in London the rate of price growth is slowing for the fourth consecutive month. Driving the rise in prices, the number of new properties coming on the market fell for the tenth consecutive month. In November 8% more respondents reported a decrease in new homes coming on to the market. The report points out that this is a trend that has persisted since the beginning of 2014. On average over the past six months buyer demand has outpaced supply across all regions. Indeed, the number of properties on surveyor’s books reached a new low in November. Anecdotal evidence suggests that the lack of stock is holding back transaction levels and agreed sales were flat in November across the UK as a whole. Last year’s stamp duty changes are also mentioned as holding back the prime market in some areas of the UK, most notably London and the South East. Although supply is currently holding back sales, respondents across the UK are positive on the outlook for the coming months, with 47% more chartered surveyors expecting to see a rise rather than a fall in activity, up from 34% in October and is the highest reading for nearly two years. ‘This is likely to be the result of new housing policies announced in this year’s Autumn Statement. New Help to Buy and Starter Homes initiatives, aimed at increasing access to home ownership, are likely to result in increased sales over the coming months,’ said Simon Rubinsohn, RICS chief economist. However, the view is still that price levels will continue to rise perhaps signalling the view from respondents that although new house building is expected to increase the belief is that this will not be enough to take the market back to more sustainable levels,’ he explained. ‘As other changes in the Autumn statement perhaps start to influence the market, although buyer demand increased on a national level at a subdued pace, London and East Anglia both saw a decline in demand with 5% more respondents seeing a fall rather than rise in the capital, and 16% more seeing a fall rather than rise in the East,’ he pointed out. He believes that this may suggest that the timing of Help to Buy may be causing some buyers to hold back and this is borne out by the sales expectations in London over the next three months, with 49% more chartered surveyors expecting a rise this is the strongest reading in the UK. ‘I can’t recall a set of comments in the residential survey which have so frequently drawn attention to lack of stock on the… Continue reading
Auckland sees unexpected property price surge
Average residential property prices in Auckland, New Zealand’s most populous city, increased by 4.2% in November month on month, the biggest rise since March 2014. This took the average price of a home to $876,075 and marks a substantial monthly rise compared to the more modest increases seen in the last seven months. The data from real estate agent Barfoot & Thompson also shows that the median home price increased by 1.9% in November compared to October to $795,000. ‘You have to go back 20 months to March 2014 to find a bigger monthly increase in the average price. For the past seven months, monthly increases have been modest, but last month buyers were as committed as ever to meeting vendor expectations,’ said Barfoot & Thompson director Kiri Barfoot. But she pointed out that while prices have ignored Government and Reserve Bank measures designed to cool prices, there has been a measurable decrease in market activity. In October market activity slowed, and that trend continued into November. The number of sales in November fell 7.7% month on month, the firm’s lowest in a month since February. New listings for the month at 1,683 were also down by 7.5% compared with October and the lowest number in the past seven months. ‘It remains to be seen if prices continue to ignore the tighter regulations, or whether November's prices are the last remnants of momentum that built in the lead up to the introduction of the tighter measures,’ said Barfoot. The data also shows that the price segment which experienced the largest decline in sales numbers in November compared to October was the $500,000 to $750,000 category. In November 286 homes were sold in this price category compared to 353 in October. It is a price category popular with investors with portfolios of less than three properties. The number of sales in November between $750,000 and $1 million, and those over $1 million were similar in number to those sold in October, as was the number of homes sold for under $500,000. Continue reading
UK commercial real estate performance set to be more polarised in 2016
After a strong 2015 experts expect the performance across different parts of the UK’s commercial real estate sectors to be more polarised over the next 12 months. According to the latest analysis from Schroders it has been another good year for UK commercial real estate and unleveraged total returns are likely to be close to 15%. One of the keys to success in 2015 was rental recovery. The report explains that whilst one of the drivers was a continued favourable fall in real estate yields, the key difference to 2014 was a broad based recovery in rental values. While central London offices have led the upswing, several other cities including Brighton, Bristol, Cambridge, Manchester, Leeds and Oxford have also seen a significant increase in office rents. Likewise, industrial rents rose in many locations, boosted by growing demand from on-line retailers and parcel couriers. In contrast however, the retail sector is still adjusting to a world of multi-channel sales, the report adds. While there are pockets of rental growth in London and some tourist destinations, most centres have a significant amount of vacancy and rents were either flat, or fell slightly in 2015. The outlook for 2016 is already categorised by some commentators asking whether we are now at the top of the cycle. Schroders' head of real estate, Duncan Owen, explained that the income from commercial real estate has historically been very stable, but capital values have been cyclical. However, capital values have risen by 25% in less than three years and there is sentiment that cannot continue. ‘This sentiment is understandable, but not necessarily rational. The immediate trigger for previous downturns has been a recession, which has depressed rents and pushed up real estate yields as investors have withdrawn from the market and liquidity has dropped,’ said Owen. ‘In addition, commercial real estate has had a habit of contributing to its own downfall, either through excessive borrowing which inflated prices such as from 2005 to 2007, or because of a boom in development which left an oversupply of space, for example from 1988 to 1990, and falls in rents,’ he added. He believes that none of the usual suspects appear to yet be evident currently. ‘Looking at the economy, the outlook is positive and the consensus is that UK GDP will grow by 2.25 to 2.5% through 2016 to 2017. The main reason for being optimistic is that the UK is finally seeing a recovery in productivity, which should support a steady increase in real disposable incomes and consumer spending. Furthermore, exporters stand to gain from faster growth in the rest of the European Union, which accounts for 45% of total exports,’ Owen pointed out. His analysis also points out that there are few signs of excess borrowing. ‘In general, banks and other lenders have continued to take a disciplined approach to commercial real estate and although total loan originations in 2015 are likely to be around £50 billion, they are still… Continue reading
