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Analysis suggests Brexit will have a varied impact on London property markets
The decision by the UK to leave the European Union is set to have a hugely varied impact across London's property markets with some likely to be worse off than others. According to a new analysis from independent property buying agency Black Bric, the sub-£2 million price bracket will continue to attract investors due to its favourable yields, good liquidity, and domestic demand. But the firm’s managing director Camilla Dell predicts that the same can't be said for the prime property market in London and the new build outer prime markets. ‘We expect the section of the market dominated by domestic buyers and those working in the financial services sector, predominantly £2million to £5 million but also up to the £12million to £15 million range, to potentially face some pressure linked to Brexit concerns,’ said Dell. ‘We do not expect the wholesale flight of financial services firms away from London, but it is likely that they will lose their passporting rights, or their ability to sell financial services across the EU if the UK does leave, triggering the departure of some financial services capacity to Dublin or the continent,’ she explained. ‘However, even relatively low numbers of bankers leaving areas such as South Kensington or Notting Hill where Europeans, in particular, tend to be concentrated could have a significant effect on local markets over the next couple of years,’ she added. Black Brick also expects the new-build outer prime market to suffer most from continuing uncertainty, having already experienced a lull period before the referendum vote. ‘The stock market has already heavily bid down builders linked to this part of the market, which is suffering from significant oversupply and the disappearance of the foreign investors who had supported it in recent years,’ said Dell. ‘Areas such as Nine Elms in Vauxhall and Earls Court in West London are particularly vulnerable due to oversupply of expensive properties aimed at the overseas investor. However, there are a handful of stand out developments, such as Television Centre, that we believe are likely to continue to prove popular, and there will certainly be bargains to be had, particularly on the secondary market,’ she pointed out. On the other hand, Black Brick expects the super prime market to be the least negatively affected, with the collapse of the sterling meaning that dollar buyers are actually factoring in a 12.5% increase in their purchasing power since before the referendum. ‘For the global elite buying properties at £15 million to £20 million or above, purchases tend to be about lifestyle choices, rather than business decisions, or are to diversify extremely large portfolios. Indeed, we are still seeing transactions continue. Brexit did not feature in conversations with clients in this part of the market before the referendum, and it is unlikely to be much of a factor now it is underway,’ Dell added. Meanwhile, London’s new Deputy Mayor for Housing James Murray has said there will be meeting with major developers and the… Continue reading
Pending home sales fall across all regions of the United States
After steadily increasing for three months, pending home sales in the United States let up in May with the first year on year fall for almost two years with all four major regions seeing a decline. The Pending Home Sales Index, a forward looking indicator based on contract signings from the National Association of Realtors fell by 3.7% to 110.8 in May from a downwardly revised 115 in April and is now 0.2% lower than May 2015. But even with last month’s decline, the index reading is still the third highest in the past year, but declined year on year for the first time since August 2014. According to Lawrence Yun, NAR chief economist, pending sales slumped in May across most of the country. ‘With demand holding firm this spring and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale in May and ultimately dragged down contract activity,’ he said. ‘Realtors are acknowledging with increasing frequency lately that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market,’ he added. Despite mortgage rates hovering around three year lows for most of the year, Yun explained that scant supply and swiftly rising home prices which surpassed their all-time high last month are creating an availability and affordability crunch that’s preventing what should be a more robust pace of sales. ‘Total housing inventory at the end of each month has remarkably decreased year on year now for an entire year. There are simply not enough homes coming onto the market to catch up with demand and to keep prices more in line with inflation and wage growth,’ Yun pointed out. Looking ahead to the second half of the year, Yun believes that the fallout from the UK’s decision to leave the European Union breeds both immediate opportunity as well as potential headwinds for the US housing market. ‘In the short term, volatility in the financial markets could very likely lead to even lower mortgage rates and increased demand from foreign buyers looking for a safer place to invest their cash,’ he said. ‘On the other hand, any prolonged market angst and further economic uncertainty overseas could negatively impact our economy and end up tempering the overall appetite for home buying,’ he added. In spite of last month’s step back in contract signings, existing home sales this year are still expected to be around 5.44 million, a 3.7% boost from 2015. After accelerating to 6.8% a year ago, national median existing home price growth is forecast to slightly moderate to between 4% and 5%. A regional breakdown of the figures shows that the PHSI in the Northeast dropped 5.3% to 93 in May, and is now unchanged from a year ago. In the Midwest the index slipped 4.2% to 108 in May, and is now 1.8% below May 2015. Pending home sales in… Continue reading
UK monthly property price growth slowed to 0.2% in May, activity expected to slow further
Residential property prices in the UK edged upwards by just 0.2% in May in the run up to the historic vote on the future of the country in the European Union, according to the latest index. This meant that annual price growth slowed to 4.7%, taking the average price to £204,368, but activity in the market is expected to slow in the coming months due to a spike in March due to stamp duty changes and now the Brexit vote. Robert Gardner, Nationwide's chief economist, pointed out that the annual pace of house price growth remains in the fairly narrow range between 3% and 5% that has been prevailing for much of the past 12 months. ‘In the near term, it’s going to be difficult to gauge the underlying strength of activity in the housing market due to the volatility generated by the stamp duty changes which took effect from 01 April,’ he said. ‘Indeed, the number of residential property transactions surged to an all-time high in March, some 11% higher than the pre-crisis peak as buyers of second homes sought to avoid the additional tax liabilities,’ he explained. He also pointed out that while cash purchases accounted for a significant proportion of the increase in activity it is not possible to determine whether or not these were purchased by landlords. Mortgage data suggests that, while buy to let purchases were a major driver of the increase, the purchase of second homes also accounted for a substantial proportion. The number of home mover mortgages, which is where second home purchases with a mortgage would show up, increased sharply in March. ‘House purchase activity is likely to fall in the months ahead given the number of purchasers that brought forward transactions. The recovery thereafter may also be fairly gradual, especially in the buy to let sector, where other policy changes, such as the reduction in tax relief for landlords from 2017, are likely to exert an ongoing drag,’ said Gardner. ‘Nevertheless, healthy labour market conditions and low borrowing costs are expected to underpin a steady increase in housing market activity once stamp duty related volatility has passed, providing the economic recovery remains on track,’ he added. ‘However, it is possible that the recent pattern of strong employment growth, rising real earnings, low borrowing costs and constrained supply will tilt the demand/supply balance in favour of sellers and exert upward pressure on price growth once again in the quarters ahead,’ he added. Gardner also explained that it is difficult to gauge how sentiment from overseas buyers will be impacted by increased economic uncertainty caused by Brexit on the one hand and the sharp decline in Sterling on the other, which, if sustained, reduces the cost of UK property in foreign currency terms. He pointed out that property prices in London have been supported by extremely robust labour market conditions as well as strong investor demand in recent years. Indeed, the price of a typical London property… Continue reading
