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UK farmland market sees muted activity post Brexit
Just over 123,000 acres were publicly marketed across Great Britain in the first seven months of 2016, which is comparable with the acreage marketed during the same period of last year. But the data from the latest UK farmland update report from real estate firm Savills suggests that uncertainty surrounding Brexit has created a lull in market activity. The data also shows that during the first half of 2016, the average value of farmland across Great Britain fell by just under 2%. The average downward trend continues to be led by arable values, which are more exposed to pressure from low commodity prices. In England activity was down by 6% but in Scotland, the opposite, a degree of referendum fatigue may have helped increase activity which was up by 8% while in Wales activity increased by 35% but the report points out that was coming from a much smaller base where a few farms can distort the figures either way. It also points out that the farmland market normally quietens in the summer so it is difficult to assess the ‘actual’ Brexit effect. ‘Most of the questions surrounding Brexit and its impact on the UK remain unanswered and will do for some time,’ said Ian Bailey, head of agricultural research. ‘But our analysis to date is beginning to suggest that the impact of changes to trade agreements could be far more significant than changes to the existing agricultural subsidy. The key issues determining prices achieved for farmland remain low commodity prices and location based demand,’ he explained. He also pointed out that in some areas there is evidence of a good number of larger farms coming to the market, especially across the southern half of England but in many areas there is an expectation that the second half of the year will be quieter than during the first six months. The Savills report predicts subdued activity overall with 2016 supply down around 8% in compared with 2015. It expects that the muted activity in England will continue to the end of the year and in Scotland there will be reduced supply in the second half of the year after an active first six months while supply is likely to be boosted in Wales. An analysis of farm transactions, where Savills acted for the buyer or seller, for the first half of the year indicates that there has not been any material change in the profile of buyers and sellers during the first half of this year compared with last year and the last analysis in February. ‘We expect this to continue into the second half of the year although, the opportunities offered by weak sterling, may increase the activity of overseas buyers,’ said Bailey. ‘Agriculture tends to do well in time of economic uncertainty. In addition, the weak pound creates opportunities for overseas buyers. Both of these factors, along with the anticipated reduced supply, may help support farmland values,’ he added. Continue reading
House price sentiment increases in UK after Brexit low but still down on peak
Households across the UK believes that the value of their home rose in August but expectations remain muted following the decision to leave the European Union. Households in the East of England perceived the biggest price growth in August, followed by those in the South West and South East, according to the latest House Price Sentiment Index (HPSI) from Knight Frank and IHS Markit. Respondents in six of the 11 regions covered by the index believe prices increased over the course of the month and the future HPSI picked up in August with households still confident that the value of their home will rise over the next 12 months, albeit at a slower pace than before the EU referendum. Households in the South of England are more confident about price rises than those in the North of England, Scotland or Wales and overall 15.2% of the households surveyed across the UK said that the value of their home had risen over the last month, while 12.4% said that prices had fallen. A breakdown of the figures shows that with those in the East of England reported the biggest rises at 58.5, followed by those in the South West t 55 and the South East at 54.5. Scotland and the North East were the only two regions where sentiment fell month on month from 49.3 and 45 to 45.6 and 44.3 respectively. This resulted in a HPSI reading of 51.4. Any figure over 50 indicates that prices are rising, and the higher the figure, the stronger the increase. Any figure below 50 indicates that prices are falling. August’s reading was an increase from the 48.3 recorded in July following the EU referendum and took the index back into 50 plus territory. However, it remains notably below the average HPSI reading for the first six months of the year before the vote which was 59.9. It is also significantly lower than the peak of 63.2 recorded in May 2014. The future HPSI, which measures what households think will happen to the value of their property over the next year, rose to 58.3 in August from 50.3 in July. While the sentiment index has risen month on month, it remains subdued on a longer term basis. The last time the future sentiment index was below 60 for two consecutive months was back in March 2013. This report says that this suggests that while households are still positive, they are expecting more modest growth in property prices over the next 12 months. There remain regional variations in future house price sentiment, mirroring trends in the wider housing market. Households in the East of England are the most confident that prices will rise over the next year at 68.3, followed by those in the South West at 64.7 and the South East 63. ‘The greater political confidence instilled after Brexit by the swift appointment of a new Prime Minister, coupled with the Bank of England’s base rate… 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
