Tag Archives: investment
Rental growth in prime central London down 3% in year to June 2106
Annual rental value growth in London’s prime property market fell by 3% in June, continuing a decline experienced in recent months that has been driven by higher stock levels and uncertainty in financial markets. The index report from real estate firm Knight Frank relates to before the UK’s decision to leave the European Union, but Tom Bill, head of London residential research said that the current sense of uncertainty following the vote is likely to boost rental demand in the short term. ‘However, any upwards pressure on rents is likely to be countered to some extent by rising stock levels, which will tick up in line with the ongoing uncertainty in the sales market and there is early anecdotal evidence that some vendors are deciding to let their property until more clarity emerges,’ he explained. Bill pointed out that underlying demand remains strong and the number of new prospective tenants that registered in June was the highest it has been since September 2015 and the number of viewings was the third highest on record. Meanwhile, the number of new tenancies agreed in June 2016 was almost identical to the same month in the previous two years. ‘For investors able to see through the current political bout of political uncertainty, there are also grounds for longer term positivity,’ Bill added. The prime gross yield in June was 3.1%, which is markedly in excess of the current record-low yield on a 10 year government bond of about 0.8%, or the so-called risk-free rate and Bill pointed out that a mood of indecision in financial markets is also more accentuated than it was before the Brexit vote, which will also cause some tenants, particularly in financial services, to rent for longer. ‘More broadly, uncertainty over the result of the referendum has been replaced by uncertainty over the more nuanced question of the UK’s relationship with Europe and demand will strengthen further as clarity emerges surrounding key negotiating positions,’ Bill said. He also pointed out that as the Brexit negotiation process unfolds, it should be remembered that no candidate for Prime Minister has indicated any willingness to relinquish London’s role as Europe’s leading financial centre. Indeed, Chancellor George Osborne has signalled he may cut corporation tax in a sign that London will strive to remain competitive versus other European cities, both as the key financial and tech market in the continent. The prospect of an interest rate cut in the UK is also likely to stimulate a degree of activity and the likelihood of further cuts by central banks in other countries, particularly in Asia, will cause global investors to seek the type of higher returns on offer in property, according to Bill. ‘This search for yield will be allied to a favourable currency play due to the current weakness of Sterling. Meanwhile, other fundamentals that remain unchanged after the referendum include the supply shortfall and projected population growth over the next decade in London, factors that will… Continue reading
Chinese emerge as enthusiastic buyers of property in the US
The volume of property sold to overseas buyers in the United States has declined slightly but Chinese people are buying more real estate, exceeding the amount of other top international buyers. Research from the National Association of Realtors suggest that waning economic growth in many countries and higher home prices along with a strengthening US dollar was responsible for the slight overall fall. However, the data, covering sales to overseas buyers between April 2015 and March 2016, reveals a significant fall in buying from non-resident foreigners. Sales to overseas buyers amounted to $102.6 billion of residential property, a 1.3% decline from the $103.9 billion of property purchased in the previous year’s survey. Overall, a total of 214,885 residential properties were bought by foreign buyers, up 2.8%, and properties were typically valued higher at $277,380 compared to the median price of all US existing home sales at $223,058. Lawrence Yun, NAR chief economist, said the figures highlight the tremendous appeal US real estate still has on many foreign nationals despite the price of property becoming less affordable. ‘Weaker economic growth throughout the world, devalued foreign currencies and financial market turbulence combined to present significant challenges for foreign buyers over the past year,’ he explained. ‘While these obstacles led to a cool down in sales from non-resident foreign buyers, the purchases by recent immigrant foreigners rose, resulting in the overall sales dollar volume still being the second highest since 2009,’ he pointed out. He also pointed out that overall foreigners, especially those from China, continue to see the US real estate as a solid investment opportunity and the country as an attractive place to visit and live. According to the survey, sales to non-resident foreign buyers pulled back by approximately $10 billion to the lowest dollar volume since 2013 when it was $35 billion. The decline was largely caused by the decrease in the share of non-resident foreign buyers to foreign residential buyers to 41%, down from the almost even split between the two in previous years. ‘Both the increase in US home prices, up 6% in March 2016 compared to one year ago, and the depreciating value of foreign currencies against the US dollar made buying property a lot pricier last year,’ said Yun. The research shows that at least eight countries, including China and Canada, saw double digit percent increases in the median sales price of a US existing home when measured in their country’s currency, led by Venezuela at 45% and Brazil at 24%. For the fourth year in a row, buyers from China exceeded all countries by dollar volume of sales at $27.3 billion, which was a slight decrease from last year’s survey at $28.6 billion, but over triple the total dollar volume of sales from Canadian buyers who were ranked second at $8.9 billion. Indeed, Chinese buyers purchased the most housing units for the second consecutive year at 29,195 but this was down from 34,327 in 2015, and also typically bought… Continue reading
Prime central London prices down 0.2% in June
Average property in the prime central London market fell by 0.2% in June, making it the weakest monthly result since November 2014, according to the latest published data. It means that year on year annual price growth in this sector is down, 0.6%, according to the index report from international real estate firm Knight Frank. Tom Bill, head of London residential research at Knight Frank, pointed out that the index data for June largely covered the period leading up to the UK’s referendum on the country’s future in the European Union. ‘Weaker price growth, together with rising economic and market uncertainty surrounding the European vote, has prompted vendors to reduce asking prices over recent months,’ he explained. But he pointed out that this more realistic approach has resulted in an uptick in activity, most notably in the immediate aftermath of the referendum result on 24 June. Following the referendum the number of transactions across prime London was 38% higher than the prior week and 29% higher than the final week of May. ‘This positive story has been widely reported, but what has often been missed is the weakness of sales prior to the vote, which has flattered more recent sales data. While the reduction in asking prices has boosted recent activity, it would be wrong to ignore market risks,’ said Bill. ‘An initial reading of post-referendum data on new buyer registrations and viewings reveals both have slipped back slightly compared to the same period a month ago although it is still very early to draw firm conclusions,’ he added. Looking ahead, Bill said that political uncertainty in the UK will undoubtedly weigh on sentiment, and will be likely to last until at least the heads of terms of the new relationship between the UK and the EU are agreed. ‘A reduction in political risk, should allow mitigating factors to kick in and support the London market. A cut in the UK base rate, while unlikely to fully translate into lower mortgage rates, would be a positive for the property market. Similarly, recent and proposed rate cuts in markets like India and China and record low government bond yields make property a more attractive investment by comparison,’ he explained. The index report also shows that the current residential yield in prime central London is 3.1% versus 0.9% on a 10 year UK government bond. Bill also pointed out that the recent weakening of Sterling is having a positive impact on relative affordability for international buyers in the London market. For example, for a Hong Kong buyer effective pricing in prime central London is 21% lower than it was two years ago. ‘Looking at the market by price band, we see a more nuanced story. On a quarterly basis, while the whole market saw prices fall 0.3%, prices for sub-£1 million properties rose on average by 0.4%,’ Bill also said. The data also shows that this outperformance of lower price points within the prime London market is… Continue reading
