Tag Archives: financial
City of London office market sees strongest recovery on record
Rents for City of London offices have proved more resilient in recent years than during previous market downturns and recoveries, according to new research. The analysis from real estate firm Knight Franks indexed City of London office rents at 100 for the pre-downturn peaks recorded in the fourth quarter of 1989, the third quarter of 2001, and the fourth quarter of 2007. This showed that rents in the most recent downturn found a floor and moved into recovery far sooner than during the early 1990s and early 2000s downturns and overall the City office market has seen its strongest recovery on record. Also, the current recovery is proving to be far more enduring than that seen after the early 2000s downturn. Indeed that market cycle lasted just six years, with the arrival of the global financial crisis in late 2007, the report points out. It also explains that the outlook is good as it is over seven years on from the market peak for rents, and growth is still occurring, and expected to continue. ‘These figures demonstrate that the City office market has proved far more resilient in recent years than anyone would have imagined back in 2007 when the financial crisis began,’ said Bradley Baker, central London tenant representation partner at Knight Frank. ‘One of the keys to the City’s success has been its’ significant diversification away from an over-dependence on the financial sector in the past and instead embracing and attracting technology and media firms such as Saatchi & Saatchi, Amazon, Hachette and Uber,’ he explained. ‘Unlike previous downturns, the current recovery began within two years of the initial crash and has been sustained for over five years. This compares favourably to the 2001/2003 and 1989/1991 crashes which took over three and four years respectively to post a recovery, and even then they were short lived,’ he added. Continue reading
New home sales down month on month in Australia
New home sales in Australia fell by 4% month on month in September, with the level of activity down from the April peak by 5.2%, the latest new data shows. Detached house sales declined in four out of the five the mainland states with only Victoria seeing growth at 3.1%, according to the New Home Sales report from the Housing Industry Association (HIA). They fell by 19.8% in South Australia, by 8.6% in Western Australia, by 5.9% in Queensland and by 0.5% in New South Wales. In Victoria detached house sales increased by 3.1%. ‘Following the peak level of sales that occurred in April this year, sales activity has trended lower only very modestly. This augers well for actual new home building activity in 2015/2016,’ said HIA economist, Diwa Hopkins. ‘A fresh record level of building activity during this financial year could have been achieved and could have been of strong benefit to the broader domestic economy but increasingly restrictive credit conditions are likely to curtail the boom in new home building,’ she pointed out. ‘The deterioration in credit conditions is likely to weigh more heavily on new home building activity beyond 2015/2016. We have therefore pared back our forecasts for activity over our forecast horizon beyond the end of the current financial year,’ she added. Meanwhile, separate research shows that offshore investment into Australia's commercial property market shows no signs of abating this year. Foreign investors accounted for 28% of transaction volumes by value in 2014 and already in the first half of 2015 the level is 27%. The Australian market is remaining attractive to offshore buyers, as commercial real estate assets continue to provide relatively high income returns in global context, according to the report from real estate firm JLL. It points out that Australian office assets are attractively priced for investors seeking high yielding, stabilised assets in a mature market, comparing well against major cities in Europe, Asia, and America. And even taking into account localised differences such as higher rent free incentive levels in Australia, yield spreads still favour the Australian market. ‘In Australia, yield compression has continued unabated, especially for prime grade assets, across all sectors and many markets. The weight of capital remains significant and the global portfolio tilt toward real estate continues,’ said Simon Storry, JLL's head of International Investments Australia. While 2014 was a record level of foreign investment into Australia, at the half year mark, 2015 levels are close to the record 28% of transaction volumes recorded in 2014. Storry said that the depreciation of the Australian Dollar has allowed offshore investors to be far more competitive and they seem to have a much greater desire to deploy substantial pools of capital in what they see as an undervalued market globally. Continue reading
UK house prices continue to creep upward, latest index shows
House prices in the UK increased by 0.6% in October, taking the average price of a home to £196,807, according to the latest index to be published. The data from the Nationwide, one of the country’s main lenders, prices are now up 3.9% year on year. The report points out that over the past five months annual price growth has remained in a fairly narrow range between 3% and 4%, broadly consistent with earnings growth over the longer term. ‘While this bodes well for a sustainable increase in housing market activity, much will depend on whether building activity can keep pace with increasing demand,’ said Robert Gardner, Nationwide's chief economist. He also pointed out that fixed rate mortgages have remained the most popular because of ongoing uncertainty about when the Bank of England might introduce an interest rate rise. ‘Historically low interest rates have helped to offset the negative impact of rising house prices on affordability. Indeed, even though house prices are at an all-time high, the cost of servicing a typical mortgage is still close to the long term average as a share of take home pay,’ Gardner explained. He said that fewer variable interest rate mortgages should help to insulate many households from the impact of higher interest rates but he warned that the majority of recent fixes are for relatively short time periods with 65% for two years and 30% for five years. ‘Nevertheless, the housing market should be able to cope with higher interest rates in the year ahead, provided the increase is modest and the economy and the labour market remain in good shape,’ he said ‘Guidance from the Bank of England suggests that the increase in interest rates is likely to be gradual, and that they are expected to settle at a level somewhat below the average prevailing before the financial crisis, which should help ensure borrowing costs remain manageable,’ he added. Alex Gosling, chief executive officer of online estate agents HouseSimple believes that as building activity is highly unlikely to keep up with demand, average house prices are likely to continue to rise and rising interest rates could affect many home owners. ‘It's hard to believe but many home owners have never known a conventional interest rate environment, and when it finally comes it could well prove a shock. If the economy holds firm then gradual rate rises will be better accommodated, but the extent of the impact of a rate rise on the market remains a great unknown,’ he explained. ‘What we can say with near certainty is that if rates rise sharply, many borrowers could get caught out. Thankfully people are moving to fixed rate mortgages to protect themselves,’ he added. According to Mark Dyason, director of Edinburgh Mortgage Advice, borrowers know higher rates are coming sooner or later and they are thinking ahead. ‘First time buyers and people with smaller deposits are especially likely to select a fixed rate because that's what most lenders are… Continue reading
