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Property To Stabilise As Monetary Policy Normalises – UBS
22 August 2013 Property values are set to stabilise in many Eurozone markets this year and next as European monetary policy normalises, resulting in rising financing costs and risk-free rates, says UBS Global Asset Management. Retail should outperform. In its 2H13 Eurozone market outlook, signed by Head of Research Gunnar Herm, UBS said: “In 2013 and 2014, real estate investors will operate in a slightly improving but still subdued economic environment. UBS does not believe the European Central Bank’s monetary easing policy will continue further, which will result in higher risk-free rates and financing costs. debt availability will remain scarce for assets beyond core property. However, additional lending sources for value-add or opportunistic assets will emerge in the core Eurozone countries as well as for the prime segment in southern Europe. The retail sector will outperform office and logistics due to high income levels and stable capital value and rental growth in most markets from 2014. In the countries hit hardest by the financial crisis, stabilisation is expected for 2015. Best performers, on a total return basis, will be France and Ireland, worst Spain, Portugal and The Netherlands. Logistics remains attractive due to the high, relatively stable income returns in the current low interest rate environment. “We anticipate a broadening range of both returns and opportunities in the sector, with growing retail and manufacturing sector interest for new, tailored space in selective locations across Europe,” said the report. Occupiers will focus on regions and countries with a strong economic outlook. UBS sees Ireland and Norway as the most attractive options for a core portfolio over the next three years. In the office sector, cost-cutting continues as the main driver of leasing activity. Due to low development activities, vacancy levels in the prime segment have been falling, resulting in a supply shortage in CBD locations and rising prime rents. Outside the prime segment, UBS expects continued pressure on capital values. France and Finland are set to outperform on a total return basis, while Germany, The Netherlands, Spain and Italy are likely to underperform. “Even though we do not believe in improving occupier market conditions in the Dutch office market, counter-cyclical opportunities may arise in the prime office segment,” said the report. pie Continue reading
France To Cut Minimum Property Holding For Capital Gains Relief
22 August 2013 The French government is to increase capital gains tax relief on investment properties and second homes, shortening the exemption minimum holding period to 22 years from 30. Along with a temporary 25% cut in capital gains tax over the next year, the move is intended to increase the supply of available housing. Gains on investment properties and second homes are subject to a 19% tax rate, with an additional tax of 2%-6% on gains of more than €50,000. From September taxable gains will be reduced by 6% a year after five years of ownership and by 4% in the 22nd year, leading to total exemption after 22 years compared with 30 years previously. However, gains will still be subject to social charges of 15.5% for 30 years. The base for these charges will be discounted by 1.65% a year between six and 21 years of ownership, 1.60% in the 22nd year and 9% a year thereafter. The base for both capital gains tax and social charges will also both be reduced by an exceptional 25% relief between September 2013 and August 2014. The reform is intended to “make the property market more fluid, support activity in the housing renovation sector and lead to a decline in prices that will help first-time buyers and tenants”, the Budget Ministry said. The 25% additional relief is designed to lead to a positive “supply shock” in the short term and ensure that the longer-term reform gets off to a solid start. The previous centre-right government reduced capital gains tax relief on the sale of second homes and rental properties, increasing the period of ownership needed for full exemption from the tax from 15 to 30 years, but this led to a drying up of sales. The new reform will be the third overhaul of the regime since 2004, whereas property investors need more stability in taxation, because of the long-term nature of their investments, said Victor Pagès, founder of My US Investment. Meanwhile, for undeveloped land the government is planning to abolish capital gains tax reliefs for longer periods of ownership, to encourage the sale of vacant land for housebuilding. The moves will be included in the 2014 budget. pie Continue reading
European Residential Property Investment Attracts Global Rich
25 August 2013, 07:16 PM Greek, Nigerian and French buyers are joining wealthy Chinese, Russian and Middle Easterners targeting European residential property, in particular new luxury developments in central London. In southern Europe meanwhile, the offer of residency permits is attracting new capital, particularly from Asia, to support suffering housing markets and economies. Foreign investors have snapped up 65-70% of new homes in prime London locations over the last two years, according to property consultancy Chesterton Humberts. That appetite, primarily from China, Russia and Mid East – drawn by the capital’s shopping and rich lifestyle – has helped push new-build home prices up by 56.3% since the start of 2009. The buyers are however increasingly targeting the homes for investment, and are now being joined by buyers from Greece, Nigeria and France looking to protect their wealth from taxes and political uncertainty in their home countries. International buyers spent £2.2bn on new luxury London residential last year, a figure that Samuel Warren, Chesterton Humberts’ head of international residential developments, expects will be exceeded this year. Large new projects, such as the redevelopment of Battersea power station, are helping drive the market. “With demand for prime new build properties set to remain robust and new supply struggling to keep up, we expect investment volumes will be higher this year than last. The relative weakness of sterling means that many overseas buyers can achieve discounts on purchase price whilst acquiring an asset that will almost certainly appreciate considerably .. and which they will have little difficulty in selling.” However, political opposition to London ‘buy-to-leave’ properties is growing, amid fears that workers on lower wages will be pushed out of central districts, and local economies will suffer. Barbara Grahame, Labour’s planning spokesperson for Westminster borough council, said parts of Westminster are turning in to a ghost town. “More ‘buy-to-leave’ luxury apartments are being built and sold as investments for overseas buyers who rarely live there, sucking the life out the West End and contributing nothing to the local community or local economy.” Around Europe, the focus on London as a safe haven comes as some troubled nations ease residency requirements to attract wealthy foreigners to buy property and re-stimulate their housing markets and economies. Spain changed legislation in July to grant residency visas to non-EU nationals spending more than €500,000 on property, a move that grants them free access across the European Union. It follows Portugal, which has also set the same threshold, and Greece and Cyprus at a minimum €250,000 and €300,000 respectively. International investment in Spanish property grew to almost €5.5bn in 2012, according to the Bank of Spain, driven by buyers from Scandinavia and Russia. The change in legislation is expected to drive more interest from Asia and push investment levels past 2012. But some commentators offer stark predictions for the country’s housing market. Angel Serrano, the head of Madrid-based property consultancy Aguirre Newman, said recently residential property prices need to fall by another 20%-25% for housing to become affordable for Spanish workers. pie Continue reading
