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Interest from buyers in inner London new developments waning
A new analysis suggests that while there has been an increase in development in London the new homes are concentrated in a handful of areas and some are so pricey that interest from buyers is waning. The result is a deepening new build crisis in inner London in particular and the lack of interest in new builds is seeing prices fall. The report from London Central Portfolio shows that overall the number of new developments approved for construction has surged this year, with a substantial 20% increase in the planning pipeline since 2013, representing 106,208 new units. However, this pipeline is largely made up of projects in cluster areas around Tower Hamlets and south of the river in the Battersea-Nine Elms area where there is already a proliferation of new developments. This year, a further 33,239 and 18,665 units respectively are now scheduled to be built. New applications have also rocketed. Applications for 17,494 new units including 111 towers, buildings over 20 storeys, have been submitted, a 27% increase on 2013. This is equivalent to one new tower application every three days, of which 90% are located in Tower Hamlets and Wandsworth’s Battersea-Nine Elms development. Despite the ever increasing number of new developments, however, statistics have shown that the attraction of these new properties, where prices now average £914,532, is waning. According to LCP’s analysis of the Government’s Land Registry data, only 1,491 new units have been sold so far this year, a substantial 43% decrease on this time in 2015. This compares with older properties in inner London where transactions have remained static, 13,194 in 2016 compared with 13,190 over the same period last year. The analysis also shows that square foot prices have also fallen for new properties. Across the Battersea-Nine Elms stretch, for example, prices are down 8% on their 2014 high. This is in stark contrast to London as a whole where prices are up 23%. New build sales volumes are also significantly down, decreasing 43% on the same period last year but the prime central London market remains largely protected, due to its limited new build potential. Sales activity has been normal in the first half of this year ‘In light of the plethora of tax hits over the last few years, possibly exacerbated by the uncertainty of Brexit, it appears foreign investors, the majority buyer of new developments, may finally be turning away,’ said Naomi Heaton, chief executive of LCP. ‘These properties typically sell at a significant premium, averaging 25%, over older stock. History demonstrates that a saturation of overpriced commodity style property leads to softening prices, particularly during times of economic uncertainty,’ she explained. ‘In Tower Hamlets, for example, which undertook an extensive building programme before the Global Financial Crisis (GFC), prices took six years to reach parity with their pre-recession level. In contrast in prime central London, where there is very limited new build due to the conservation of… Continue reading
Strong fundamentals mean UK property market set to see 3% growth overall in 2016
Strong market fundamentals remain in the UK’s regional residential property markets despite recent political events, most notably the decision to leave the European Union. The latest analysis from real estate firm CBRE suggests that UK house prices are expected to grow by an average of 3% this year with current growth of 5.1% across the country regarded as encouraging. The report says that the Outer Metropolitan area saw the strongest performance in the second quarter of 2016 with prices up 12.4% in June. London followed closely with 9.9% growth, whilst the North was the weakest performing region with prices down 1% year on year. It explains that with a period of uncertainty ahead, the UK remains in a strong position with high employment, low borrowing costs and weaker sterling which will help boost exports and although buyer sentiment is likely to remain cautious prices will continue to grow. ‘Despite some short term turmoil following the referendum, the UK still has otherwise very stable economic foundations. While the recovery in 2013 was largely driven by consumer spending, there are now encouraging signs of growth becoming more broad based and coming from multiple sectors,’ said Jennet Siebrits, head of residential research at CBRE. ‘London and the UK are still robust investment regions with a strong and established legal structure, favourable time zone, world class education system, and a durable, settled, democratic political structure. Despite the outcome of the EU referendum, our current forecasts remain broadly unchanged and we expect UK house prices to grow by an average of 3% this year,’ she added. Overall the report says that London’s land market remains highly price sensitive and underpinned by cautious sentiment, but activity remains driven by the capital’s acute supply/demand imbalance. In the South East, the residential land market continued at a strong pace in the second quarter of the year, driven by a number of successful converted office schemes and Permitted Development Rights opportunities. It is the South West supply/demand imbalance remains a key driver of price and rental growth, whilst the private rented sector dominates city markets. But in the Midlands Birmingham city centre dominates, with a reliance on office to residential conversions for the delivery of much needed housing stock. There are further new entrants to the market and Birmingham remains one of the key target cities for institutional investment, it adds. The trend of the last two quarters continues in the North, with modest house price rises driven by an emphasis on lower value £180 to £190 per square foot areas benefitting from the government’s Help to Buy schemes. It also points out that in Scotland, the sub-£500,000 housing market is performing well, whilst LBTT rates continues to impact the upper end of the market. Meanwhile, Scotland’s land market has seen prices generally increase off the back of an acute lack of supply. This is particularly evident in the prime regions of Edinburgh and East Lothian, where values are now pushing £1.2 million per… Continue reading
Steady rise of equity release in UK housing market continues
Some £8.2 million of housing wealth was withdrawn in the UK every working day in the second quarter of 2016 as equity release lending passed £0.5 billion for the first quarter on record. Overall there was £514.4 million of lending in quarter two, up 34% year on year and 58% higher than in the second quarter of 2014, according to the latest figures from the Equity Release Council. The council report points out that the three busiest quarters for equity release lending have all come within the last 12 months and the annual rise in the number of new plans agreed is the fastest seen in 13 years. Common uses for equity release include paying off existing mortgages and loans, providing extra retirement income, funding home improvements or care related adaptations, paying for travel or other one off expenses, and gifting money to family members as a ‘living inheritance’. The council also says that over 55s increased appetite to use housing wealthy has been supported by market developments which include new providers and increasing choice of products and features emerging. In addition, the market received support from the regulator in April when they amended the legislation to allow optional interest repayments to be exempt from mortgage affordability rules. Year on year, the council’s figures show the biggest percentage growth in the value of lending in the second quarter of the year was for lump sum lifetime mortgages, typically involving a larger release of housing wealth in a single payment, up 37% or £56.8 million compared to the second quarter of 2015. However, lending via drawdown lifetime mortgages, allowing consumers to make multiple withdrawals of equity as and when needed, continued to account for the larger share of the market, growing 31% or £72.4 million to £304 million compared to the second quarter of 2015. Home reversion plans also experienced a rise in the second quarter of 2016 with the total value of activity more than doubling year on year from £623,647 in the second quarter of 2015 to £1.5 million. Looking at new customers’ product choices, some 67% opted for drawdown products in the second quarter, up from 65% a year earlier, while the share of lump sum products dipped slightly from 35% to 33%. With market activity having grown significantly during that time, the number of new drawdown plans agreed was up 27% year on year compared with 16% for lump sum plans. Overall, it meant the total volume of new plans agreed across the whole market was up 23% year on year, the highest annual growth rate in nearly 13 years since the third quarter of 2003. The 6,671 new plans agreed was the largest quarterly total since the fourth quarter of 2008. ‘These figures are the latest sign that UK home owners increasingly see housing wealth as a fundamental part of their retirement funding plans. The long term rise of house prices… Continue reading
