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UK property markets set to see slowing of growth in 2015 says CBRE
UK property sectors are set to continue to expand, in 2015 but the overall trend will be a slowing of growth to more sustainable levels, a new analysis suggests. Prime London markets will continue to grow in 2015, but confidence and investor interest will encourage growth in prime regional markets and secondary housing markets will fare better than in recent years, according to real estate advisor CBRE. It points out that in 2014, total returns to property averaged nearly 20% and in 2015, there will be a slowing of growth rates with average returns just under 13%. The general election in May will bring some uncertainty into property decision making but year on year there is expected to be significant rental growth for most sectors but a further improvement in yields as investment inflows continue into the UK market. Prospects for retail properties remain among the most uncertain, with few sure signs just yet that stable growth is returning to consumer spending, and cost pressures and distractions across the sector, particularly in grocery retailing, although in 2015 as in 2014, prime retail destinations will remain a safe bet, the report explains. Industrial property will continue to be attractive for investors due to a dearth of quality supply but price growth in the housing market will ease in 2015 to around 6% with transaction levels having peaked for the time being. ‘This has been a year of extraordinary expansion across the property sector and while this will continue into 2015, overall there will be a return to more sustainable levels of growth,’ said Miles Gibson, head of UK research, CBRE. ‘Rental growth will continue in all sectors and we expect investment yields to continue to improve as levels of capital flows into the UK market remain high. In terms of where growth, we forecast a ripple effect next year as property investors shift from London out to the regions,’ he explained. ‘Global economic factors, most notably the falling price of crude oil, in 2015 will benefit the UK. The likely effects of pushing down inflation and boosting consumer spending, means we should expect to see a knock on benefit for retailers which in turn could stimulate growth in the retail property sector,’ he added. ‘Although there positive signals for the property market, we recognise that there will be uncertainty caused by the imminent general election. The combination of these trends makes 2015 an intriguing prospect for property markets,’ he concluded. Continue reading
Scottish prime property market set to be busy due to tax change in April
An increase in demand for prime property in Scotland between September and December ensured a strong end to 2014, both in terms of prices and sales, the latest index report shows. Overall prime Scottish country house values rose by 1% in the final quarter of 2014 following two quarters of no change and prices ended the year up 2.1%, after a 1.6% increase in 2013, according to the figures from Knight Frank. The index report points out that the rise in prices seen in the fourth quarter came amid a notable step up in buyer demand, attributed to the certainty provided by the result of the Referendum vote and the announcement of the proposed Land and Buildings Transaction Tax (LBTT) that replaces stamp duty in Scotland from April. ‘After months of doubt about the outcome of the referendum, buyers now feel more secure about making a decision to move house or purchase a property,’ the report says. ‘The proposed LBTT rates published in October clarified how purchase taxes would change in April. The higher upfront cost of moving when LBTT comes into force, especially in the prime market, has prompted some home buyers and vendors to make quick decisions,’ it explains. Under the rates proposed in the incoming LBTT system, any sales above £254,000 will incur a higher rate of tax compared with the current stamp duty structure, introduced in December in the Autumn Statement by George Osborne. For properties in the prime market, the cost will be significantly higher. The report also shows that the number of potential buyers registering their interest in purchasing a property with Knight Frank was 18% higher in quarter four than the same period a year ago, with a similar rise in viewings. Sales were over 50% higher during the same period. ‘We expect this trend will continue into the New Year, driven by a desire among vendors and homebuyers to move before the introduction of the new LBTT levy in four months’ time,’ said Ran Morgan, head of Scotland residential at Knight Frank. He pointed out that under the current system, a house costing £900,000 will incur a stamp duty payment of £35,000, whereas the upfront costs under the new LBTT system for the same property will be 92% higher at £67,300. As a result of the stamp duty reforms announced during the Autumn Statement, by the time LBTT is introduced, home buyers in Scotland will have had to adjust to three different tax systems within six months. ‘The announcement of the proposed Land and Buildings Transaction Tax rates in October has already encouraged vendors and homebuyers in the prime market to make quick decisions to avoid the increased tax burden. We expect this will continue and as a result are anticipating a busy start to 2015,’ said Morgan. ‘In the country estates market, details of Land Reform proposals and CAP reform continue to emerge. Until these are finalised we expect the activity to remain subdued,’ he added. Continue reading
Pension changes could boost buy to let in UK
Pension regulation changes in the UK could boost the buy to let market as so called silver landlords decide to invest in the sector, it is claimed. Some 32% of people aged 45 to 64 with a pension would consider using some or all of their pension pot to fund a buy to let property as an alternative to a more traditional pension fund, according to research by Direct Line for Business (DL4B). It highlights that the number of 'silver landlords' could increase significantly given the changes in pension regulation which mean that from April 2015, people approaching retirement and pensioners will be able to access as much or as little as they want from their pension pots. Buy to let is becoming an attractive option for people, especially while property and rents rise, according to property lettings expert, Kate Faulkner, as it can deliver some great returns over 15 to 20 years. ‘Given the recent pension liberation announcement, for some it could be good to diversify their investments when approaching retirement, but landlords need to seek financial/expert advice and ensure they understand the returns that property can deliver and especially the tax implications,’ she said. As property and rental prices continue to rise, buy to let can provide a regular income flow while also offering the opportunity for capital appreciation. The research shows that 43% of potential 'silver landlords' would consider it on the basis that it produces regular income. Some 23% are attracted by the perceived security of the investment, 17% by the expected capital appreciation and 9% of potential buy to let investors favour the investment because they would like to invest in something that will allow them to leave an inheritance to their children. The research highlighted the perceived high returns available for landlords as those approaching retirement anticipate an average (median) yield of between 10% and 14% on their investment. ‘Buy to let can be a flexible investment, providing an immediate source of income as well as being a long term asset. As such, it is understandable that people approaching retirement age are considering investing their pension pots in property,’ said Jazz Gakhal, head of Direct Line for Business. ‘However, prospective landlords should understand that buy to let does not come without financial risk. Legal expenses for repossessions and potential damage to property are but just a few of the costs that can take significant chunks out of landlords' annual yield,’ he pointed out. ‘Taking the necessary precautions such as carrying out full reference checks on prospective tenants, inspecting your rental property regularly, and taking out landlord insurance can help to minimise some of the risks faced by landlords,’ he added. Continue reading
