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Brexit hits UK commercial property market sentiment
Sentiment in the UK’s commercial property market has dampened significantly since the referendum vote to leave the European Union with investment demand falling sharply, most notably in London. The heightened sense of caution is visible across both investment and occupier sides of the market, with uncertainty pushing rental and capital value projections into negative territory, according to the latest commercial property market survey from the Royal Institution of Chartered Surveyors. It shows that and increasing share of respondents across the UK now feel the market is in an early downturn phase and the 12 month capital value and rental projections have now moved into negative territory. On a UK wide basis, occupier demand failed to rise for the first time since 2012. The headline net balance fell from +21% previously to a reading of zero in the second quarter of the year. Declines were reported in the office and retail areas of the market but demand proved somewhat more resilient across the industrial sector. The regional breakdown shows the occupier demand gauge moderated across all parts of the country, although the shift was most noticeable in London. Alongside this, availability remains constricted, with the supply of leasable space more or less unchanged in the office and retail sectors during the second quarter, while industrial availability continued to decline. Worries over a potential hit to business confidence, caused by political and economic uncertainty, appear to be reflected in respondents’ rental outlook. This is especially the case over the shorter term. Indeed, the headline three month rent expectations net balance dropped from +26% to -7% in the second quarter. The office and retail sectors experienced the steepest decline, with the reading for both now comfortably in negative territory. In the industrial sector, although the net balance softened notably, it remains positive given the very tight supply and demand conditions. When the results are disaggregated, the rental outlook is most negative in London. Over the next 12 months, rents are projected to fall by around 3% at the all-sector level. Within this, rents across the secondary retail sub market are expected to come under the most significant downward pressure. The survey report points out that the weakness in demand is perhaps even more visible on the investment side of the market. During the second quarter the investment enquiries series fell sharply, posting a net balance of -16%, down from +25% in the first quarter of the year. What’s more, all traditional sectors covered in the survey experienced a drop-off in investor interest. Foreign investor demand declined at an even greater rate, as the net balance fell to -27%. While respondents in virtually all parts of the UK noted a decline in overall investment enquiries, the trend was again most pronounced in London. In fact, at -41%, the investment enquiries gauge for the capital was the weakest since 2009. Back at the UK wide level and, despite a softening demand backdrop, the supply of… Continue reading
Asking prices down across England and Wales post Brexit vote
The price of property coming onto the market in England and Wales has fallen by 0.9% or £2,647 with momentum continuing due to a supply shortage, according to the latest asking price report. Activity is within usual expectations for the run-up to the summer holiday season and buyer demand in the two weeks since the European Union referendum result is consistent with 2014 although down on 2015. The monthly report from property portal Rightmove points out that the same period in 2015 benefitted substantially from a post general election boost so enquiries this year are down 16% compared to that period. It adds that as 2014 was not distorted by the election it is a better basis for comparison, and buyer enquiries are at the same level as the like for like two weeks in 2014. Since 2010 the month of July has recorded average price falls of 0.4%. The Rightmove data shows that new seller asking prices fell by 1.2% or £7,407 this month in Greater London while in inner London they fell by 2.3% or £19,051. The seven cheapest inner London boroughs all saw price of newly listed property falling while asking prices in outer London were unchanged. Asking prices fell by 0.7% month on month in the North East, taking the average to £147,251 but are still up 0.3% year on year. In the North West they fell by 0.5% month on month to £176,277 and are 3.6% higher than a year ago and in Yorkshire and Humber they were down 2.1% month on month to £172,412, and up 1.3% year on year. In the West Midlands month on month prices were down 1.6% to £200,129 and still up by 3.6% year on year while in the East Midlands they were down 0.2% month on month to £190,192 and are up 3.9% year on year. The East of England saw asking prices fall by 0.7% to £313,255 but they are 7.3% up compared to a year ago. In the South East they fell 0.6% to £386,988 and are up 6.7% year on year while in the South West they were down 0.4% to £286,155 and up 5.2% year on year. In Wales asking prices fell by 2.3% month on month, taking the average price of a newly listed home to £177,280 but prices are 2% up compared to July 2015. According to Rightmove, most agents report market momentum continuing due to shortage of suitable property for sale, buyers fearful of missing out on scarce choice, and affordability and availability of low mortgage rates. Sellers seem undeterred as compared to the same period last year, the two weeks pre-referendum saw the number of new properties coming to market down by 8%, and the two weeks post referendum saw them up by 6%. Overall the figures covering the last four weeks, two weeks before and two weeks after the referendum, give an early but reassuring view into the short term effect of the political turmoil… Continue reading
Hong Kong saw residential property prices stabilise in June
Residential property prices in Hong Kong stabilised in June with more activity mainly in the primary sector, as developers launched new projects with deep discounts and other enticements. According to the Land Registry, residential sales in June edged up 0.7% month on month, reaching 4,620 units. The gain was attributed mainly to robust activity in the new homes market. Meanwhile there have been more home buyers returning to the market looking for bargains, according to the latest monthly market review report from international real estate consultants Knight Frank. It points out that several new residential developments were oversubscribed in June. One example was Park Yoho Venezia in Yuen Long, which managed to sell over 90% of its available units within hours on the first day of the launch. This trend is expected to continue, with developers offering deep discounts and aggressive mortgage schemes to boost sales. Interest in the ultra-luxury residential market showed no signs of abating. For example, the top floor unit in Severn Villa on the Peak sold for HK$232 million or HK$170,463 per square foot, making it the most expensive apartment in Hong Kong. Knight Frank believes that high net worth individuals are expected to continue acquiring premium residential properties in Hong Kong given their scarcity and high status. The report also points out that the government of Hong Kong has announced that seven residential sites, capable of providing 4,800 flats, will be available for sale by application in the third quarter. As of the end of May, the number of homes pending pre-sale consent had risen 11% month on month to 14,526 units, the highest level in eight months, according to the Land Department. ‘Given the increase in supply and uncertainty brought about by Brexit, we maintain our forecast of a 5% to 10% drop in luxury home prices and up to a 10% decline in mass residential prices over the year,’ the report concludes. Meanwhile, in the commercial sector Grade-A office leasing on Hong Kong Island remained subdued in June. On the supply side, tight availability limited choices in the market, while on the demand side mainland companies slowed their expansion pace in Hong Kong after the previous leasing boom. The report points out that the Kowloon East office market remained very active, with the key driver being relocation demand from tenants across the harbour. One reported example involved Kingfisher, which moved from Cornwall House in Quarry Bay to KOHO in Kwun Tong. Over the past few months, a number of co-working space operators have been aggressively expanding in Hong Kong, becoming one of the major sources of demand for office space. For example, WeWork reportedly took up large office space of about 60,000 square feet in Asia Orient Tower in Wan Chai last month. A US co-working space operator reportedly took up four floors, spanning 29,000 square feet in Soundwill Plaza in Causeway Bay. ‘Looking ahead, we expect rents in core business areas to rise… Continue reading
