Tag Archives: government
Cost of land to build prime homes in Asia still rising
Prices of residential sites in Asia increased by 1.9% in the first half of 2016, down from 2.8% in the preceding six months, put office land increased from 1.9% to 2.2%. Overall development land investment volumes in Asia matched the level registered in the corresponding period last year, according to the Prime Asia Development Land Index from international real estate firm Knight Frank. As compared to the preceding six months, however, they were 40.4% lower and the index report explains that land markets tend to be more active in the second half of the year, which accounts for 60% of the transactions historically. With state owned enterprises purchasing land aggressively, China, which accounts for more than 90% of the deals in Asia, saw a 6% year on year increase in volumes while in Thailand some major deals boosted volumes by 190.4%. However, cross border land investment volumes fell by 11.5% year on year. ‘Part of the reason is that while Chinese developers have previously snatched up land in Hong Kong and Singapore, they now appeared to have joined their local counterparts to become more cautious amid the ongoing correction in housing prices in these markets,’ the report explains. As a result, China bought 88.8% less land year on year in the rest of Asia. In China, among the cities tracked, Shanghai experienced the strongest growth in prime residential land prices. ‘While the government raised the down payment requirement on second and subsequent properties as well as tightened non-locals’ purchase eligibility, shadow banking and peer to peer financing helped home buyers circumvent these rules, although authorities are closing the loopholes,’ it adds. According to the National Bureau of Statistics, residential prices in Beijing, Guangzhou and Shanghai surged by 15.3%, 12.8% and 19.5% respectively in the first half of 2016 and the report says this emboldened developers to bid for land aggressively. In particular, Shanghai saw the average premium over reserve price in residential land auctions soar to 154% in the first six months of the year from 60% in the corresponding period last year. As a result of an overhang of unsold prime housing inventory in Mumbai and New Delhi that requires an estimated four and seven years to clear respectively, the Knight Frank indices registered a decline in prime residential land prices. It adds that strong office leasing demand boosted the prices of prime office development sites in Bengaluru, which grew the fastest in the region. Similarly, prices of commercial land in Mumbai and New Delhi outperformed those of residential sites. Tokyo registered the largest increase and the report says that the negative interest rate introduced by the Bank of Japan has brought mortgage rates down, supporting housing demand. Indeed, recent condominium launches with hefty price tags were met with much enthusiasm from home buyers, with one development in Minato ward even fetching a record high average price of US$33,800 per square meter. Sites for office development in Asia also… Continue reading
Interest from buyers in inner London new developments waning
A new analysis suggests that while there has been an increase in development in London the new homes are concentrated in a handful of areas and some are so pricey that interest from buyers is waning. The result is a deepening new build crisis in inner London in particular and the lack of interest in new builds is seeing prices fall. The report from London Central Portfolio shows that overall the number of new developments approved for construction has surged this year, with a substantial 20% increase in the planning pipeline since 2013, representing 106,208 new units. However, this pipeline is largely made up of projects in cluster areas around Tower Hamlets and south of the river in the Battersea-Nine Elms area where there is already a proliferation of new developments. This year, a further 33,239 and 18,665 units respectively are now scheduled to be built. New applications have also rocketed. Applications for 17,494 new units including 111 towers, buildings over 20 storeys, have been submitted, a 27% increase on 2013. This is equivalent to one new tower application every three days, of which 90% are located in Tower Hamlets and Wandsworth’s Battersea-Nine Elms development. Despite the ever increasing number of new developments, however, statistics have shown that the attraction of these new properties, where prices now average £914,532, is waning. According to LCP’s analysis of the Government’s Land Registry data, only 1,491 new units have been sold so far this year, a substantial 43% decrease on this time in 2015. This compares with older properties in inner London where transactions have remained static, 13,194 in 2016 compared with 13,190 over the same period last year. The analysis also shows that square foot prices have also fallen for new properties. Across the Battersea-Nine Elms stretch, for example, prices are down 8% on their 2014 high. This is in stark contrast to London as a whole where prices are up 23%. New build sales volumes are also significantly down, decreasing 43% on the same period last year but the prime central London market remains largely protected, due to its limited new build potential. Sales activity has been normal in the first half of this year ‘In light of the plethora of tax hits over the last few years, possibly exacerbated by the uncertainty of Brexit, it appears foreign investors, the majority buyer of new developments, may finally be turning away,’ said Naomi Heaton, chief executive of LCP. ‘These properties typically sell at a significant premium, averaging 25%, over older stock. History demonstrates that a saturation of overpriced commodity style property leads to softening prices, particularly during times of economic uncertainty,’ she explained. ‘In Tower Hamlets, for example, which undertook an extensive building programme before the Global Financial Crisis (GFC), prices took six years to reach parity with their pre-recession level. In contrast in prime central London, where there is very limited new build due to the conservation of… Continue reading
Strong fundamentals mean UK property market set to see 3% growth overall in 2016
Strong market fundamentals remain in the UK’s regional residential property markets despite recent political events, most notably the decision to leave the European Union. The latest analysis from real estate firm CBRE suggests that UK house prices are expected to grow by an average of 3% this year with current growth of 5.1% across the country regarded as encouraging. The report says that the Outer Metropolitan area saw the strongest performance in the second quarter of 2016 with prices up 12.4% in June. London followed closely with 9.9% growth, whilst the North was the weakest performing region with prices down 1% year on year. It explains that with a period of uncertainty ahead, the UK remains in a strong position with high employment, low borrowing costs and weaker sterling which will help boost exports and although buyer sentiment is likely to remain cautious prices will continue to grow. ‘Despite some short term turmoil following the referendum, the UK still has otherwise very stable economic foundations. While the recovery in 2013 was largely driven by consumer spending, there are now encouraging signs of growth becoming more broad based and coming from multiple sectors,’ said Jennet Siebrits, head of residential research at CBRE. ‘London and the UK are still robust investment regions with a strong and established legal structure, favourable time zone, world class education system, and a durable, settled, democratic political structure. Despite the outcome of the EU referendum, our current forecasts remain broadly unchanged and we expect UK house prices to grow by an average of 3% this year,’ she added. Overall the report says that London’s land market remains highly price sensitive and underpinned by cautious sentiment, but activity remains driven by the capital’s acute supply/demand imbalance. In the South East, the residential land market continued at a strong pace in the second quarter of the year, driven by a number of successful converted office schemes and Permitted Development Rights opportunities. It is the South West supply/demand imbalance remains a key driver of price and rental growth, whilst the private rented sector dominates city markets. But in the Midlands Birmingham city centre dominates, with a reliance on office to residential conversions for the delivery of much needed housing stock. There are further new entrants to the market and Birmingham remains one of the key target cities for institutional investment, it adds. The trend of the last two quarters continues in the North, with modest house price rises driven by an emphasis on lower value £180 to £190 per square foot areas benefitting from the government’s Help to Buy schemes. It also points out that in Scotland, the sub-£500,000 housing market is performing well, whilst LBTT rates continues to impact the upper end of the market. Meanwhile, Scotland’s land market has seen prices generally increase off the back of an acute lack of supply. This is particularly evident in the prime regions of Edinburgh and East Lothian, where values are now pushing £1.2 million per… Continue reading
