TSI
UK farmland market sees east/west divide open up
An east/west divide in value growth for farmland in the UK has opened up in what has been a mixed year for sector, according to a new analysis report. Indeed, 2015 was a year of change across the farmland markets as, for the first time in a decade, price falls in arable land values were recorded in the eastern counties of England, the Savills Farmland Value Survey shows. Grassland values, generally in the west, which have lagged behind arable values, have continued to increase and this has created an east/west divide and also mirrors the contrasting supply dynamics, as noted on Supply and Demand 2015, which has also been a contributory factor to supporting values in the west. Farmers made up 50% of farmland sellers last year, the highest proportion in seven years as low commodity prices and the short term outlook for UK agriculture prompted some to capitalise on high average land values and retire. The report points out that farmers made up the smallest proportion of buyers since 2003 at 43% of all transactions. Meanwhile, non-farmers including lifestyle buyers, investors and institutional/corporate buyers represented the biggest percentage of purchasers in the past 12 years. Expansion of an existing holding was the principal motivation to buy, representing the predominant reason in more than half of all transactions, with three quarters of those farmers who took on more land citing expansion as the reason to buy. Just short of 176,500 acres of farmland were publicly marketed across Great Britain in 2015, an increase of 24%, or an additional 34,000 acres compared with 2014. Across England, market activity increased by 16% to around 120,000 acres with a clear divide between the eastern and western regions. Increased supply was recorded in the eastern regions, most notably in the East Midlands. In contrast, reduced supply was recorded down the western side of England. In Scotland market activity increased 47% in 2015, which may be the result of a combination of factors including pressure on farm incomes and some pent-up activity following a year of uncertainty caused by the Scottish Referendum. ‘In the light of recent market evidence, the short to medium term expectations for commodity prices and therefore farm profitability, we have downgraded our forecasts for the next five years. We expect values to be much more varied than in the past five years,’ said Alex Lawson, director of National Farms and Estates at Savills.. ‘Exceptional prices may still be achieved if all the right factors come together, but conversely it is very likely that there will be more farms where potential sale prices fail to reach expectations or they fail to sell. We expect this market will last three to four years until commodity prices start to recover, following stronger global growth,’ he explained. Continue reading
Commercial property rents in London saw average growth of 8.5% in 2015
Growth in commercial property rents across London fuelled average total return of 18.1% from investments in the capital during 2015, new research shows. The London markets analysis report by Levy Real Estate and MSCI examined more than £30 billion of assets across 20 key submarkets and found that rental growth increased year on year from 7.8% in 2014 to an average uplift of 8.5% last year. The strongest rental growth was registered by the Camden/King’s Cross submarket where the continued success of the King’s Cross Central development saw the prevailing level of rents grow on average by 17%. High occupier demand and a lack of space in other submarkets is also driving rents, the report says, adding that Mayfair, for example, where the continued conversion of office property to residential has limited the supply of new space saw rental growth of 11.9% last year. ‘The latest research shows a market which still has significant momentum. Returns are now increasingly being driven by a growth in rents and this suggests that London’s commercial property investment sector can expect further sustainable growth in values,’ said Levy Real Estate Investment Partner, Simon Heilpern The progressive rents in and around King’s Cross also meant that the Camden/King’s Cross showed the highest total return for a single submarket of 27.3%. It was followed in the total return rankings by the Eastern Fringe at 24.7% and Marylebone and Euston at 23.1%. Overall, Mayfair retained its position as the submarket with the most keenly valued property: the average equivalent yield for its property was just 3.7%. The area has also seen a continued conversion of office property to residential which has contributed to an upward shift in rents, the report points out. The biggest inward yield shift during 2015 was in the Western Fringe locations of Clerkenwell, Smithfield and Farringdon where average equivalent yields moved in 80 basis points to 5.2%. However, the general picture is a slowing down in yield shift which illustrates the growing importance of rental growth. ‘The London investment market had another good year in 2015, with strong returns on the back of healthy rental value growth across the commercial property market. As in 2014, fringe markets outperformed last year with locations such as Camden/King’s Cross and the Eastern Fringe remaining attractive to both occupiers and investors,’ said Colm Lauder, MSCI vice president. ‘Pricing in the London market also strengthened further during the course of 2015, but the rate of yield compression has slowed as key market locations begin to reach record yield levels which question price fundamentals,’ he explained. ‘This has resulted in rental growth taking over as the main performance driver, as confident, and expansionary, businesses compete for space,’ he added. Continue reading
Prices in Australian cities up 0.5% in February, but growth is moderating
Property prices in Australia’s capital cities increased by 0.5% in February and by 1.4% over the last three months, according to the latest index figures. However the trend in annual growth has slowed over the last seven months from 11.1% to 7.6%, the CoreLogic RP Data home value index also shows. Prices increased in all capital cities apart from Perth and Canberra were prices fell by 1.1% and 0.2% respectively and over the past three months they increased across all capitals except Sydney where they fell by 0.2%. An examination of the data shows that the largest monthly increases in home values were recorded in the cities that have been underperforming over the growth cycle to date. In Hobart values were 2.9% higher, Adelaide up 1.9% and Brisbane up 1.8%. The cities to record the greatest value rises over the past three months have been Hobart with growth of 8.5%, Melbourne up 3.8% and Brisbane up 2%. According to CoreLogic RP Data head of research Tim Lawless, even though home values have trended lower over the year in Perth and Darwin, they have recorded value rises of 0.2% and 0.3% respectively over the past three months. He also pointed out that while values are still increasing across most capital cities however, the results remain diverse. Sydney and Melbourne remain the strongest markets in trend terms, however, the gap is widening between the performances of Melbourne relative to Sydney. Over the past 12 months, combined capital city home values have increased by 7.6%, with the annual rate of growth down from a recent peak of 11.1% recorded in July last year. Melbourne has maintained its number one growth position, with annual capital gains of 11.1%. ‘Melbourne values appear to be holding reasonably firm since December last year with the annual rate of capital gain virtually level over the past three months,’ Lawless explained. Sydney’s annual rate of growth has continued to moderate, having almost halved from its cyclical peak of 18.4% recorded in July last year to reach 9.5% growth over the past 12 months. Lawless said that despite the slowing trend, Sydney remains the second best performing capital city over the past year but he pointed out that a few of the smaller cities where growth rates have recently accelerated may start to rival Sydney’s position over the coming months. ‘The trend in home value growth is showing signs of increasing in those markets that have previously underperformed. These include Brisbane, Adelaide, Hobart and Canberra. Affordability constraints aren’t as apparent in these cities and rental yields haven’t been compressed to the same extent as what they have in Melbourne or Sydney,’ Lawless said. ‘Home values increased in Brisbane by 5.5% over the past year, which is the fastest annual rate of value growth in a year. In Hobart, home values are 6.2% higher over the year, which is its fastest annual rate of home value growth since July 2010,’ he added. Continue reading
