Tag Archives: finance
Uncertainty creeping into UK housing market likely to be short term
Uncertainty is set to creep into the UK housing market due to stamp duty changes, the European Union referendum and forthcoming regional elections, it is claimed. Overall short term confidence in the market has flattened following the rush from buy to let investors to beat the extra 3% imposed on additional homes at the start of April, says the latest monthly survey report from the Royal Institution of Chartered Surveyors (RICS). Survey respondents say that the uncertainty is fuelled by stamp duty changes, a weaker pound, the UK potentially leaving the EU (Brexit) and devolved elections in Scotland and Wales and local elections in England. The report also shows that the rate of house price inflation is slowing with indicators pointing to more modest house price gains and house prices have fallen further in London than elsewhere. These factors have been most strongly felt in central London, where 38% more respondents expected to see house prices fall over the next three months. The report also says that across the UK, while expectations around the number of new house sales peaked following the Chancellor’s Autumn Statement, this trend has reversed with 2% more respondents expecting to see the number of sales fall rather than rise over the coming months. Confidence around house price inflation has also dampened with 17% of respondents (net balance) expecting to see prices rise over the next three months, compared to 44% (net balance) in December. However, the longer term outlook suggests that prices will still be expected to rise by more than 4% each year for the next five years across England and Wales, with prices in London projected to grow by a broadly similar amount rising by 3% each year over the same period. Despite, the increased rates of stamp duty tax, now expected to be paid by prospective landlords, rent inflation, while expected to increase, is not predicted to rise any faster than it has in previous months. Although over the next five years respondents continue to anticipate rents will increase by an average of 4.5% per annum, there is no indication yet that tax increases are being passed on to the tenant. The expected rate of rent of inflation has remained constant for the past year at around 3%. ‘As expected, the buy to let rush has now run its course and, as a natural result, the market is starting to slow. But there are other significant factors that are currently weakening short term confidence in the UK property market,’ said Simon Rubinsohn, RICS chief economist. ‘Elections inevitably bring with them periods of uncertainty in the market, and our figures would suggest that next May’s devolved elections are no exception. Likewise, the EU referendum, is likely to be an influencer in terms of the damper outlook for London in particular,’ he added. ‘However, all indications suggest that whatever the outcome of the forthcoming elections and referendum, in the long term, the imbalance between demand and… Continue reading
UK referendum on European Union membership set to hit real estate markets
The forthcoming UK referendum on the country’s future in the European Union poses risks for the re sector due to the uncertainty it is creating, according to a new analysis report. This uncertainty leading up to the vote on 23 June is likely to have a somewhat paralysing effect on investor decisions on real estate purchases, says the report from Standard and Poor’s. It also says that should the country decide in favour of leaving the EU, known as Brexit, then the uncertainty will be prolonged during the subsequent exit negotiations and this may turn investor sentiment more negative. ‘This could potentially reverse the significant boost to real estate asset values that the UK and London in particular has experienced in recent years. Added to this, financial services firms, already under pressure to contain costs, may find an additional reason to reduce office space in London,’ the report explains. ‘Consequently, we consider the risks to the real estate sector of a Brexit may be most pronounced in the commercial real estate sector, particularly in the office segment, more than in retail and logistics,’ it points out. ‘We also think the effects will be more concentrated in London than other parts of the UK. Within the capital, the City of London would be hardest hit, because of a high concentration of international financial services firms,’ it adds. Given the possible negative consequences of Brexit, Standard and Poor’s said that its ratings on real estate investment companies, home builders, and structured financing in commercial and residential mortgage backed assets will require ongoing monitoring. It suggests that in the next few months ahead of the referendum, the uncertainty regarding the outcome of the vote may slightly disrupt the real estate markets. ‘We think it could lead to some deferrals in deals, timed to close after, rather than before the June 2016 vote. We expect that commercial real estate may be more heavily affected than residential overall, as businesses may delay their investment decisions and investors may put on hold contemplated transactions pending more clarity on the referendum result,’ the report says. ‘In our view, a vote in favour of Brexit would accentuate and prolong this period of paralysis since it would most likely take several years for the terms of the exit to be defined. Since the 2009 downturn, wealthy individuals and institutional investors have considered the UK real estate sector a very safe asset class. These assets attracted sustained investor demand primarily for their value preservation characteristics,’ the report explains further. ‘A vote in favour of a UK exit from the EU in June 2016 would likely threaten that perception of safety, at least for some time. A falling UK currency may also contribute to such a change in perception but would also make real estate in the UK less costly to international investors in foreign currency terms,’ it states. It makes the point that residential real estate would not be immune to a Brexit. ‘The… Continue reading
Asking prices rise across the UK apart from in London
Asking prices increased in all parts of the UK except London, up 0.5% month on month, according to the latest property index to be published. The East of England saw the largest monthly rise of 1% as demand continues to outweigh supply in the region but overall the annual home price for England and Wales fell to 7.5%, the data from the Home.co.uk index shows. The report suggests that typical time on Market figures in the East of England, the South East and Greater London are contrary to seasonal expectations, and this is a clear indicator that the anticipated slowdown is taking hold as demand dips, at least for the time being, while the market pauses for breath. The total stock of property for sale remains historically very low indeed despite gradually rising supply in London and Scotland. In all English regions outside of London and in Wales, scarcity holds firm as the key market driver. Overall, the number of properties entering the UK market is down 6% compared to a year ago. The supply shortage is most keenly felt in the West Midlands where 12% less new stock arrived on estate agents' books during last month compared to March 2015, and this will ensure prices in this region keep rising over the summer months. Similarly, the South West of England supply shortage is worsening as indicated by 11% less stock being registered on agent portfolios last month. The index report point out that market activity in the formerly lacklustre North East shows signs of significant improvement. There and in the North West, marketing times have reduced considerably and prices are on the rise. The North West market is improving more quickly as supply levels in this region indicate a new declining trend and consequently prices may show further significant upward progress across the rest of the year. Meanwhile, the Welsh property market remains the poorest performer. Prices there have fallen by 0.2% over the last six months and marketing times are higher than in any English region or Scotland. ‘Overall, the current mix-adjusted average asking price for England and Wales is now 7.5% higher than it was in April 2015, and we predict further rises over the next few months due to worsening supply in an increasing number of regions. However, the year on year rise is expected to attenuate as the London market cools,’ said Doug Shephard, the firm’s director. He explained that a buy to let stampede ahead of the new stamp duty charges means that growth might now slow. ‘Any sort of lull in demand from investors will be welcomed by first and next time buyers, especially those who had the wisdom to sit on their hands until the dust settled,’ he said. ‘The current figures suggest that London will be the best area to take advantage of waning demand and rising supply, but prices today remain very high and properties will need to hang around on the market much… Continue reading
