Tag Archives: economics
UK property prices set to rise by almost 20% or average of £60,000 in next five years
Property prices in the UK are predicted to continue their upward trend, rising by nearly £60,000 over the next five years, according to new research. Prices are expected to rise by 3.5% in 2016 with further annual increases of around 4% in the four years that follow, says the latest analysis from the Centre for Economics and Business Research (Cebr). Indeed, the forecaster says that 2015 annual house price growth has been revised up from 4.7% in June to 5.6% this month and the average price of a UK property is set to stand at a record high of £263,000 this year. The research also shows that the price gap between a terraced house and a purpose built flat in London nearly quadrupled from £46,000 in 2000 to £176,000 in 2014. It points out that a lack of properties coming onto the market is one of the reasons behind the upward revision to the forecast. Households expect property values to keep rising so as such individuals want to sell at the top of the market, but at the moment few anticipate a downturn in prices. Yet overall home ownership has risen dramatically among older households since 1981, but has collapsed among younger households. With retired individuals less likely to move home, this is curbing the number of individuals putting property up for sale, the report explains. It also reveals a substantial increase in the cost of moving up the property ladder, especially in London. Moving up the property ladder has historically been a key reason to sell a home but for many this has become infeasible. The high cost of moving home, with stamp duty costs curbing house moves and the report says this is particularly the case at the prime end of the property market which saw a substantial increase in stamp duty rates in last December’s Autumn Statement. Low levels of housebuilding are also reducing the number of new builds being put up for sale in the UK. The Cebr suggests that the new Housing and Planning Bill will not go far enough in controlling rising home prices. It claims that reconsidering various other housing market features is also necessary. For example, the UK’s population is getting older and with retired individuals less likely to move home, added incentives are necessary to encourage ‘rightsizing’. For example, a stamp duty exemption or reduction for those looking to ‘rightsize’ would encourage pensioners to put larger properties on the market. ‘A reduction in the number of properties being put on the market has placed further upward pressure on house prices in some parts of the UK. This is a result of low levels of house building, but also other factors such as an ageing population and the rising cost of moving up the property ladder,’ said Nina Skero, Cebr economist and main author of the report,. ‘The price gap between a first time home and a larger family home has skyrocketed… Continue reading
Scottish university cities offer best buy to let yields in the UK
University cities in Scotland offer the best areas for profit for buy to let investors in the UK, with the overall best average rental yield in Edinburgh, new research has found. The 6.11% yield in Edinburgh came out top in the report from property website Zoopla as Scottish cities took third, fourth and fifth places with 5.66% in Aberdeen, 5.11% in Dundee and 5.07% in Glasgow. The only English university city in the top five was Coventry with an average buy to let rental yield of 6.03% giving the Midlands city second place. University cities in the North of England were found to be among the worst investment opportunities for buy to let landlords. Middlesbrough, where the main Teesside University campus is located, recorded the lowest average rental yield in the UK at 1.47%. The North Western city of Lancaster, home to Lancaster University, was the second worst performer with a 1.87% yield, while Lincoln, posted an average yield of 2.14%, the third lowest in the league table. The research shows the cities hosting the very best universities are not necessarily the very best options for buy to let investors. Cambridge, for example, failed to make it into the top 10 with a below par average yield of 3.65%. Even London, with its world famous London School of Economics and Imperial College London, registered an underwhelming 3.97% average yield while Oxford only managed eighth place in the league table with an average 4.61% yield. ‘Scottish university cities are currently offering fantastic returns for UK landlords. Many Scottish universities are now internationally renowned, with thriving undergraduate and graduate environments,’ said Lawrence Hall of Zoopla. ‘This means demand for rental accommodation in university areas is very high, as throngs of students compete to live near their campuses. Combined with Scottish house prices still remaining relatively low, this equates to excellent yields,’ he pointed out. ‘Some may be surprised that the golden triangle of London, Oxford and Cambridge are not producing higher yields. However, given those areas have a pedigree of high property prices, buy-to-let investors there would likely spend a higher proportion of rental income paying off their properties’ mortgages than their counterparts north of the border,’ he added. Continue reading
UK commercial property sales reach highest level since the economic downturn
The number of UK commercial property transactions has reached its highest level since the credit crunch, with 115,400 sales in the last year, a 6% jump, according to the latest figures to be made available. Data from HMRC shows that the number of transactions is up 24% from a low of 92,900 in 2008/2009, but still significantly below 2007/2008 when there were 139,000 sales. An analysis of the figures by commercial law firm EMW, suggests that England is dominating the country’s market. There were 97,500 commercial property transactions in England last year, accounting for 85% of the UK total, this figure is also the highest since 2007/2008 when there were 115,700, 83% of the UK total. The report explains that the relatively high yields on property when compared to other investments, continues to attract both UK and, increasingly, overseas investors. ‘Commercial property assets are proving increasingly attractive to investors looking for higher yields in an environment with record low interest rates and this is driving activity towards pre-credit crunch levels,’ said Nick Marshall, principal at EMW. ‘There has also been a surge of interest from overseas investors, with the UK offering investor friendly lease terms. The relative shortage of vacant prime office space in central London is also making the market more attractive to investors,’ he explained. ‘Bank lending has also picked up which has led to more activity in the market and lenders are now happier to fund purchases at higher loan to value ratios. Without higher LTVs, many property investors were finding it hard to get the economics of their investments to work,’ he added. Meanwhile, according to the latest Commercial Market in Minutes report from Savills, downward pressure on prime yields is set to resume across six sectors of the market while income and rental growth will begin to drive the total return. Savills expects downward movements in prime yields to return across M25 offices, provincial offices, high street retail, shopping centres, industrial distribution and industrial multi-let, largely driven by a lack of new stock coming to the market. Also, West End and City office prime yields are at an all-time low at 3% and 4.25% respectively, compared to 3.25% and 4.25% in May of last year. However, unlike the early phase of the UK’s economic recovery which saw investors rely on an uptick in capital value to produce total returns, Savills says the market will have to focus more on income return and rental growth. The firm suggests this shift is a clear indicator that the market has moved on as the rate of capital value growth begins to slow from its peak of 12.95% in October 2014 compared to a current level of 11.04% for the year to the end of May 2015. ‘Rental growth is no longer just a London story and while office and retail in the Capital remain at the top, an outward ripple of recovery suggests strong… Continue reading
