Tag Archives: australia
18 year comparison index shows UK buy to let outstripping other asset classes
Buy to let in the UK over the past 18 years has provided average returns that outstrip those of other major asset classes, new research shows. Every £1,000 invested in an average buy to let property purchased with a 75% loan to value (LTV) mortgage in the final quarter of 1996 would have been worth £14,897 by the final quarter of 2014, a compound annual return of 16.2%. The same investment in UK commercial property would have grown to £4,494, in gilts or UK government bonds to £3,329, in UK shares to £3,119 and in cash to £1,959, according to the research from buy to let lender Landbay. A buy to let purchaser buying entirely with cash would have seen each £1,000 invested grow to £5,071 by the end of 2014, a compound annual return of 9.4%. The report points out that 2014 was a good year for buy to let investors with property prices rising by an average 8.3% over the course of the year. The index shows that mortgaged landlords achieved average returns of 18.3% for the year, 81.9% of which was comprised on capital gains while the unmortgaged index achieved returns of 7.9%. The figures cover 18 years with a comparison from 1996 as this was the year the buy to let mortgage initiative was launched by the Association of Residential Letting Agents (ARLA) and buy to let mortgage lenders, opening residential rental property to ordinary investors. ‘The phenomenon of buy to let as an asset class only goes to underline the stable personal finances of landlords. The stability of returns shown in this paper underlines why this group of borrowers can be so attractive for lenders. In fact the history of buy to let can be viewed as a history of opportunity for those offering the financial backing to landlords,’ said John Goodall, chief executive of Landbay. ‘However, the bigger trend underlined here is the democratisation of such investments, which started a generation ago, and is far from complete. Buy to let itself is only one example of this shift. Now new models of peer to peer finance can give access to the returns involved in lending to such industries. Since 1996 ordinary investors have been able to be landlords, but now in 2015, ordinary investors can play the role of the bank,’ he explained. The report includes an updated 10 year projection for buy to let returns assuming house prices rise 4% a year, rents by 2% a year and mortgage rates rise to 5.5% by 2022. The projections suggest that every £1,000 invested at the end of last year using a 75% LTV mortgage would be worth £2,874 by the end of 2024, an average annual return of 11.1%. The corresponding annual return for an unmortgaged investor would be a more modest 6.1% but not far short of the rate of return from equities over the 1996 to 2014 period. ‘If these projections prove to be broadly… Continue reading
Sydney soars ahead with strong price growth compared to other Australian cities
Home values in Australia’s capital cities increased by 1.4% in March with Sydney leading the way with strong growth of 3% while prices elsewhere were relatively flat, the latest index shows. On a quarterly basis prices increased by 3% in the first three months of 2015, the CoreLogic RP Data Home Value Index also shows. However, although value growth has started 2015 on a strong note, the annual rate of growth has moderated back to 7.4% which is the slowest annual growth rate since September 2013. On top of the 3% monthly price rise, values in Sydney are up 5.8% on a quarterly basis and 13.9% on an annual basis. With stronger housing market conditions over the first three months of the year, annual home value growth across the Sydney market has rebounded after slowing to 12.4%, according to head of research Tim Lawless. He pointed out that Sydney is the only housing market where dwelling value growth remains in double digits, with the next strongest performer, Melbourne, showing a much lower rate of annual capital gain at just 5.6%. Each of the remaining capital cities have recorded an annual rate of growth which is less than 3% with values having declined across Perth, Darwin and Hobart over the year. The index data also shows that since home values began their current growth phase in June 2012, prices across the combined capital cities have increased by 24.3%. ‘Most of this growth is emanating from Sydney. Over the current growth phase, Sydney dwelling values have increased by 38.8% with Melbourne second strongest at 23.6%. On the other hand, total dwelling value growth over the current cycle has been less than 10% in Adelaide, Hobart and Canberra,’ said Lawless. He also explained that while the overall quarterly rate of growth is strong it is important to note that it is lower than the 3.5% increase in home values over the first quarter of 2014. While dwelling values continue to rise across most cities, weekly rents are failing to keep pace. Across the combined capital cities dwelling rents have risen by just 1.7% over the past year which is a stark contrast to the 7.4% capital gain in dwelling values over the same period. Sydney is showing the highest increase in weekly rents over the year at 3.3% while Perth has shown the most substantial correction, with weekly rents down 4.1% over the past 12 months. The fact that dwelling values are moving higher at a much faster pace than rents is causing gross rental yields to consistently compress across each of the capital cities, the index report says. Since the middle of 2013 the average gross rental yield across Australia’s combined capital cities has reduced from 4.3% to 3.6%. Gross rental yields are now approaching record lows in both Melbourne and Sydney at 3.3% and 3.6% respectively. ‘Despite the headwinds of softer labour markets, very low rental yields, increased oversight on lending conditions and heightened economic uncertainty,… Continue reading
Most property hotspots in UK are in London
Nine out of 10 property hotspots in the UK are in London with Sutton named in the latest index that monitors the number of properties sold in comparison to those on sale. The south west London borough has seen a 67% demand for property with the previous top spot of Bexley pushed down to sixth position with 62%, according to the index from online estate agent eMoov. The two London Hotspots are joined in the top 10 by a number of other outer London boroughs and commuter friendly towns, with quick and improving transport links into the heart of the capital. They are Cambridge at 66%, Watford at 64%, Bristol and Reading both at 63%, Guildford at 59%, Aylesbury at 57%, Havering at 57% and Hillingdon at 56%. Some parts of London have seen demand drop severely, for example Wandsworth at 32% has seen a fall of 11% since December 2014 and has dropped out of the top 50 hotspots. With a property demand of just 12%, Nine Elms is the coldest spot in the UK. The firm says this is a surprise as the area is due to benefit from the planned extension of the Northern Line. But it seems that those already selling their property in Nine Elms, may have jumped the gun and increased the price in anticipation. The resulting inflation in house prices looks to be a factor influencing the low demand in the area at present, it is also contributing towards the decline in property demand for Wandsworth as a whole. Although outer London and the surrounding commuter areas have continued to enjoy a strong demand for property, it is in fact the North West that has seen the most marked improvement. The hotspots that have enjoyed the biggest turn around in demand since December are mostly located in the North West. Sefton has seen the greatest improvement in demand, up 80% since December, followed by Huddersfield up 56%, Trafford up 24%, Bradford up 23%, Stoke-on-Trent and Bolton both up 21% and Warrington up 19%. Half of the top 10 coldest spots in the UK are in the north east. North Tyneside with a current demand percentage of 13%, is the second coldest spot across the UK and has seen the biggest decrease in demand for property since December, falling by 43%. It is closely followed by County Durham, where demand declined over the course of 2014 and has continued to do so, dropping by a further 37% on December’s hotspots index. ‘It’s almost a tale of two halves in the North alone, let alone the North and South. The North West seems to be flourishing as demand for housing increases almost across the board. It is however a very different picture in the North East, as it accounts for a number of the coldest spots in the March Hotspots Index,’ said Russell Quirk, the firm’s chief executive officer. ‘As we predicted last summer, commuter towns around the capital… Continue reading
