TSI
Investment in European commercial property up by 25% in 2015 year on year
A total of €64.5 billion was invested in European commercial property in the final quarter of 2015, which took volumes for the full year to €238.5 billion, a 25% increase on 2014. However, the fourth quarter total was only slightly up, by 0.5%, on the same quarter of 2014, indicating that investment growth lost a little momentum towards the end of the year, according to the latest European quarterly commercial property outlook report from Knight Frank. However, it shows that increases in investment activity were widespread in 2015, with the core markets of the UK, Germany and France all seeing transactions rise by more than 20%. Among peripheral markets, investment volumes grew particularly strongly in Italy and Portugal, both fuelled by surging demand from international investors. The strength of investor demand kept European prime yields under downward pressure throughout 2015, although the pace of yield compression slowed in the final quarter. Also, the European weighted average prime office yield came down by four basis points in the final three months of 2015 to an all-time low of 4.79%, largely on the back of yield compression in Amsterdam, Berlin, Brussels, Copenhagen and Lisbon. The report points out that with large amounts of capital continuing to target European property, strong investment activity is expected to continue in 2016. However, the exceptional growth in transaction volumes seen in 2015 is unlikely to be repeated. Knight Frank’s forecast is that European investment in 2016 will be broadly in line with 2015 volumes. Many of the factors that supported the investment market in 2015, including the stabilising Eurozone economy, low interest rates and wide yield spreads to other asset types look set to remain favourable to property investors throughout 2016, the report says. The report also points out that Eurozone GDP growth is forecast to improve modestly to around 1.7%, following an increase of 1.5% in 2015. The European Central Bank has indicated that it may be prepared to make further interest rate cuts to support economic growth at a time when its main refinancing rate is currently 0.05% and the deposit rate is already in negative territory at -0.3%. Supported by the stabilisation of the Eurozone economy, European occupier market activity improved healthily in 2015. On an annual basis, aggregate take-up in the major markets monitored by Knight Frank rose by 10%. This was despite falling take-up in Europe’s two largest markets, London and Paris, and was driven by the strong performance of German, Iberian and CEE markets. Prime rents remained stable in the majority of European markets in the fourth quarter but the Knight Frank European Prime Office Rental Index rose by 0.9%, driven by increases in Dublin, Frankfurt, London (City), Madrid and Stockholm. The report suggests that rental growth may spread to a wider range of cities in 2016 with Paris, for example, expected to see prime office rents increase following more than two years of stability. Continue reading
New home building increases in the US as demand outstrips supply
New home building in the United States increased by 5.2% to a seasonally adjusted annual rate of 1.178 million units in February, according to newly released data. The figures from the US Department of Housing and Urban Development and the Commerce Department show that single family production increased 7.2% to 822,000 units, its highest level since November 2007while multifamily starts remained virtually unchanged, inching up 0.8% to 356,000 units. ‘This month’s report is consistent with positive builder sentiment and other economic indicators showing that the housing market continues to recover at a gradual pace,’ said Ed Brady, chairman of the National Association of Home Builders (NAHB). ‘February’s single family gains indicate that this sector is strengthening in line with our forecast. As the US economy firms, job creation continues and mortgage interest rates remain low, we should see further growth in housing production moving forward,’ said NAHB chief economist David Crowe. Combined single and multifamily starts rose in three of the four regions in February, with the West, Midwest and South posting respective gains of 26.1%, 19.9% and 7..1% The Northeast registered a 51.3% loss. A decline in the volatile multifamily sector pushed overall permit issuance down 3.1% in February. Multifamily permits fell 8.4% to a rate of 436,000 while single family permits were up 0.4% to 731,000. Regionally, permits increased in the Northeast by 40.4%. The Midwest, West and South registered respective permit losses of 11.4%, 7.2% and 4.4%. Continue reading
Continued UK house price growth underpinning positive sentiment
Households across the UK believed that the value of their home rose in March with the imbalance between demand and supply underpinning house prices growth. Some 25.1% of the 1,500 households surveyed for the latest House Price Sentiment Index (HPSI) from Knight Frank and Markit Economics, across the UK said that the value of their home had risen over the last month, while 4% said that prices had fallen. This resulted in a HPSI reading of 60.5. This is the thirty-sixth consecutive month that the reading has been above 50. Households in every region perceived that the value of their home rose in March, however there were significant regional variations, reflecting wider trends in pricing across the UK market. Londoners perceived the biggest increase at 71.7, followed by those in the South East at 67.4 and East of England at 66.3. In Scotland and the North West the perceived rate of growth was slower at 53.3 and 54 respectively. The future HPSI, which measures what households think will happen to the value of their property over the next year, rose in March to 71.6, from 69.8 in February. March’s reading was the highest recorded by the index since August 2014. The rise in future sentiment was driven by households in southern England, with those in the South East at 81, the East of England at 80.3 and London at 78.9 were notably more confident than those in the North East at 61.4 and Scotland also at 61.4. ‘The fundamentals for the UK housing market remain steady, especially around mortgage costs which remain at record lows. The imbalance between demand and supply of housing is also underpinning house prices. The delivery of new homes remains some 30 to 40% below the levels needed to start to address the annual shortfall of housing in the UK,’ said Gráinne Gilmore, head of UK residential research at Knight Frank. ‘There have already been several large targeted government policies to try and boost development and ease the path of first time buyers and it is notable the future sentiment reading for 25 to 34 year olds is the highest it has been for 15 months,’ she pointed out. ‘As reflected in the index, the sound fundamentals of the market will combine to support overall prices in the coming year, but as the index also reveals, the market will continue to be multispeed across regions and price bands,’ she added. Tim Moore, senior economist at Markit, explained that the latest survey is a clear signal that UK house prices have stayed on an upward trajectory throughout the first quarter of 2016. ‘One of the factors supporting price sentiment seems to be the expectation that interest rates will remain ultra-low for longer, and this belief has become more widespread so far this year. Households’ current price sentiment is stronger now than at any time over the past 17 months, but the economic landscape is not lacking in potential headwinds for buyer confidence,’… Continue reading
