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Buy to let rush boosted rental supply in the UK, especially London
The buy to let rush in the UK ahead of stamp duty changes in April boosted rental supply with London seeing the biggest increase, a new analysis report shows. The rental market received a boost of 8% more new properties advertised to rent in the second quarter of the year compared to the same quarter in 2015, according to the data from property portal Rightmove. The majority of new properties were in London, up by 22% on the same period last year, resulting in a small drop in the region’s average asking rental price to just under £2,000 per month. Despite the increase in supply, all other regions recorded a rise in average asking rents this quarter, with the East of England’s 5% annual change leading the way. The data also shows that rental enquiries were up 2% in the second quarter 2016 compared to last year, and up 1% in the two weeks after the referendum compared to same two weeks in 2015, as the lettings market shows no immediate signs of a Brexit impact. The supply boost failed to stop rents rising 2.8% in the second quarter outside London in England and Wales, though this is only 0.1% higher than the rise in the second quarter of 2015. The East of England’s year on year increase of 5% was the highest of all regions, while the South East saw rents increase the most over the quarter, up by 5.1%. London saw the biggest increase in supply this quarter compared to any other region with growth of 22%, resulting in a fall in average asking rents by 1.1% to just under £2,000 per month. ‘The big spike in March transactions resulting from a large number of investors beating the more punitive stamp duty tax deadline has created a rental supply boost which is good news for prospective tenants actively looking for a new place to live,’ said Rightmove’s head of lettings Sam Mitchell. ‘Now that the stamp duty changes have come in this boost may be short-lived, as landlords consider whether or not to make further purchases. Our own research among landlords shows that just under a third of them are concerned that the stamp duty changes, plus the forthcoming tax relief changes, will potentially wipe out their profits,’ he explained. ‘Once the tax relief changes start to be phased in from next year new buy to let activity could slow further. However rental demand is still outstripping supply in many areas of the country so we may see a shift by investors to look in areas that offer better yields for long term property investments,’ he added. The report suggests that investors planning to continue expanding their portfolio could look to some of the areas with highest demand from prospective tenants. The top five places include Ashton-Under-Lyne, Stalybridge and Oldham in Greater Manchester where average asking rents for two bedroom properties are around £520 per month and you can buy a two bed… Continue reading
European commercial real estate investment up 2.5% in second quarter of 2016
Commercial real estate investment remained strong across Europe in the second quarter of 2016 totalling €54.0 billion, up 2.5% on the previous quarter and 30.4% on the 10 year average, new research shows. However, overall activity fell short compared to the second quarter of 2015 with the office sector having the strongest quarter, seeing an 8.3% increase on the first three months of 2016, driven by a particularly strong performance in the Nordic region. The research from CBRE also points out that despite uncertainty in the UK caused by the European Union referendum, sentiment remained strong in other European markets and investment levels were stable year on year. Investment volumes in France and Sweden, Europe’s third and fourth largest markets, were particularly resilient. The data shows that over the last year investment in these markets has grown 32% and 20% respectively. Indeed, second quarter results in both France and Sweden were boosted by buoyant office sectors. Ireland also performed extremely strongly, transacting a record €2.3 billion of commercial property deals in the second quarter of 2016, more than double that of the same quarter last year, although the sale of the Blanchardstown Centre for close to €1 billion closed during this quarter. Poland followed suit, transacting €1.5 billion in the second quarter, over three times the level recorded in the same period last year. But Germany showed decreased levels of investment in the second quarter, which is likely connected to a lack of availability of stock in the core markets, which dampened the European total. Core property in Germany remains highly regarded as a safe haven and sentiment remains strong. The UK also performed less strongly than its continental European counterparts in the run up to the Brexit vote although strong fundamentals continue to underpin the UK market. The recent depreciation of sterling, coupled with low interest rates, has attracted the attention of overseas investors to the UK, and with the spread between bond yields and property being the widest on record, the fundamentals of UK and continental European real estate remain attractive. ‘Whilst investors have reacted cautiously to Brexit, the market fundamentals remain strong and investors still have significant capital to deploy. The uncertainty means that many investors will watch and see how the market develops before deciding how to act, said Jonathan Hull, managing director of Investment Properties EMEA at CBRE. ‘However, sentiment is already improving as the UK enters a more stable political environment and there are signs that the market is responding positively to this,’ he added. According to Miles Gibson, head of UK research at CBRE, the EU referendum risk was undoubtedly one factor affecting investment activity in the second quarter. ‘But instability in the financial markets earlier in the year was similarly important in causing investors to be more risk averse,’ he added. Continue reading
Research reveals poor record on new home building in England
The shortage of housing in England is set to become more acute due to the decision to leave the European Union with current levels 30% below those recorded before the economic downturn in 2008. Indeed, recommendations put forward by the Barker Review of housing supply in 2004 that 270,000 new homes should be built every year have never been met, according to a new report from the Yorkshire Building Society. It means that the country has missed its house building targets by a 1,199,180 since 2004. And despite the government pledging in 2015 to build a million homes by 2020 only 142,890 were built in 2015 as a whole, 29% less than the 200,000 homes which would need to be built per year to reach the one million target by 2020. The Barker Review highlighted that England alone would need to increase its level of house building by 145,000 in order to reduce annual house price inflation to 1.1%, regarded as a more controlled level of growth. This figure was based on there being 125,000 completions in 2002/2003, meaning that the recommended number of homes needed per year to reduce house price growth to 1.1% was 270,000. Given that this recommended level of house building has never been reached in the years since and that the recommendations in the Review only relate to England alone, the number of properties needed in the UK each year to reduce house price inflation to 1.1% is now likely to be significantly higher than the 270,000 figure, the report points out. The figures therefore show that the government’s target of building 200,000 homes per year is at least 70,000 properties a year short of what the country needs. The UK came closest to the 270,000 figure in the years leading up to the 2007 financial crisis. In the years between the publication of the Barker Review in 2004 and the advent of the financial crisis in 2007, an average of 213,080 homes were built each year. By comparison, the average number of homes built in the eight years since the financial crisis is 30% below the pre-crisis average, at 148,563 properties. ‘The Brexit decision and the uncertainty it creates around the prospects for private sector house builders, not to mention the country’s economic outlook, is likely to heighten the housing crisis,’ said Andrew McPhillips, chief economist at Yorkshire Building Society. ‘Addressing the shortage of homes must remain high on the Government’s agenda regardless of the work required following the EU vote. We need a clear strategy to deliver the 1.2 million additional homes and options like giving local councils fuller control of existing housing funding, as well as freedom to develop surplus public land, should form a key part of that,’ he explained. ‘The longer we leave the supply crisis to worsen, the more difficult it will be to resolve. The UK has failed to build the number of homes needed to meet demand year after year, which… Continue reading
