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Higher taxes and election uncertainty put brakes on prime London house prices
Prices in the prime property market in London fell marginally in the first quarter of 2015, confirming concerns that higher taxes and pre-election qualms are affecting the sector. They were down 0.5% quarter on quarter and this follows an average 2.6% price adjustment in the final quarter of 2014, according to the latest research from international real estate adviser Savills. The firm says this was triggered by the stamp duty reform announced in December’s Autumn Statement and means that the 12 month rolling prime London average has slipped into negative territory. However, Savills research is forecasting that prices in the prime London market will rise by 23% over the next five years assuming no further taxation of high value property. The prime central London housing market has been most affected by increased stamp duty charges and values are down 1.1% on a quarterly basis and 4.3% year on year, a reflection of the fact that the more valuable markets have borne the brunt of increased stamp duty charges. By contrast, the markets of Islington, Wapping and Canary Wharf continue to show positive annual growth, despite an easing in values in the past six months. Year on year the north west prime market is up 1.8% but down 0.6% quarter on quarter. North London is up 6.2% year on year and down 0.8% quarter on quarter. The data also shows that the East of City prime market has seen prices rise 4% on an annual basis but down 1.5% quarter on quarter while in the south west prime market prices are down 2.6% year on year and down 0.2% quarter on quarter. But over the longer term prices in the prime sector have seen considerable growth. Over the last five years prices in central London are up 30.8%, in north west London up 30.7%, in south west London up 38.1%, in north London up 45.6% and in east of City up 41.6%. Overall the prime market has seen growth of 36.6% over five years. Since the peak of the market prices in price central London are up 33.6%, in north west London up 28.4%, in south west London up 33.7%, in north London up 42.3% and in east of City up 33.6%, taking the growth for the whole of London to 34.3%. ‘As we forecast in November, uncertainty regarding the general election and the potential for further taxation of high value property have contributed to a subdued market in the first part of 2015,’ said Lucian Cook, head of UK residential research at Savills. ‘The stamp duty changes came after five and a half years of sustained price growth for prime London property. This segment of the market is now looking fully taxed and sellers are having to factor in price adjustments equivalent to the stamp duty increase,’ he explained. The analysis also shows that by contrast, the softening in… Continue reading
US home prices growing at fastest rate for a year
Existing home sales increased modestly in the United States last month but prices are growing at their fastest pace for a year, the latest index data shows. Total existing home sales, which are completed transactions that include single family homes, town homes, condominiums and co-ops, rose 1.25% in February and are 4.7% higher than a year ago and above year on year totals for the fifth consecutive month. The data from the National Association of Realtors also shows that the median existing home price for all housing types in February was $202,600, some 7.5% above February 2014. This marks the 36th consecutive month of year on year price gains and the largest since last February when it was 8.8%. According to Lawrence Yun, NAR chief economist, although February sales showed modest improvement, there’s been some stagnation in the market in recent months. ‘Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,’ he said. ‘Stronger price growth is a boon for home owners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise. Severe below freezing winter weather likely had an impact on sales as more moderate activity was observed in the Northeast and Midwest compared to other regions of the country,’ Yun explained. The data shows that total housing inventory at the end of February increased 1.6% but remains 0.5% below a year ago. For the second month in a row unsold inventory is at a 4.6 month supply at the current sales pace. The share of first time buyers was 29% in February, up slightly from 28% in January and the first increase since November 2014. First time buyers represented 28% of all buyers in February 2014. All cash sales were 26% of transactions in February, down from 27% in January and down considerably from a year ago when it was 35%. Individual investors, who account for many cash sales, purchased 14% of homes in February, down from 17% in January and 21% in February 2014. Some 67% of investors paid cash in February. Distressed sales, that is foreclosures and short sales, amounted to 11% of sales in February, unchanged for the third consecutive month and down from 16% a year ago. Some 8% of February sales were foreclosures and 3% were short sales. Foreclosures sold for an average discount of 17% below market value in February compared to 15% in January, while short sales were discounted 15% compared to 12% the previous month. ‘Investor sales are trending downward due to the continued rise in prices and fewer bargains available from distressed properties coming onto the market,’ said Chris Polychron, NAR president. He added that real estate agents in areas popular with foreign buyers, such as South Florida and the West Coast, are reporting tempered demand from international clients who typically pay in cash and this… Continue reading
European commercial property investment market seen as attractive
The European commercial property investment market enjoyed a strong end to 2014, according to the latest quarterly report from Knight Frank. It says that the outlook for 2015 has been boosted by the European Central Bank’s (ECB) announcement in January of a programme of quantitative easing which will help to maintain the attractive yield premiums offered by property over government bonds. Overall a total of €57.9 billion was invested in European commercial property in the fourth quarter of 2014, making this the strongest quarter since the second quarter of 2007 and investment volumes for the whole of 2014 came to €177.6 billion, 21% up on 2013. The firm says that investors have continued to show an increased appetite for risk, targeting a wide variety of non-core locations and sectors. Investment volumes increased strongly in Spain, Ireland, the Netherlands and the UK regions throughout 2014, while the Portuguese investment market finally revived in the final quarter of the year, having been one of the last of the peripheral markets to show signs of recovery. The report explains that the current strength of the investment market comes in spite of more modest and varied trends in European occupier markets. In 2014, office take up increased in markets such as London, Paris and Berlin, but fell in Frankfurt, Vienna and Moscow. However, the Knight Frank European Prime Office Rental Index rose by a modest 0.8% in the fourth quarter with London, Dublin and Lisbon being the only major markets to record increases in prime office rents. ‘The European investment market has continued to gain remarkable momentum. We expect 2015 to be another strong year, bolstered by the ECB’s QE programme,’ said Matthew Colbourne, international research associate at Knight Frank. ‘By leading to falls in European government bond yields, the QE announcement has further widened the spreads between property and bond yields. It will help to preserve the attractiveness of property as an asset class in 2015 and beyond,’ he added. Continue reading
