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Record foreign investment in UK commercial property, but it is slowing
Last year saw record foreign investment in UK commercial property but a sharp slowdown in the second half of the year will make 2016 more of a challenge, a new analysis suggests. Some £67.5 billion was invested in UK commercial real estate in 2015, a 5% decrease on the record of £70.7 billion invested in 2014, making it the second strongest year on record and 46% above the 10 year average, according to the latest research from CoStar Group, a commercial property information provider. Momentum slowed sharply in the second half of the year, with investment down 19% from the previous year. The firm says that this reflects the fact that investment activity has been especially strong over the previous 18 months and good opportunities are harder to find, but also that increasing global economic and political uncertainty is impacting investment decisions. Nevertheless, 2015 was a strong year for the UK's big six regional cities. Office investment increased 16% to £3.2 billion, which is the highest level since the recession and more than double the eight year average. Foreign investors seeking standing assets and development opportunities underpinned much of this investment. Foreign investment into the UK totalled a record £27.8 billion in 2015 a 6% increase on 2014’s £26.2 billion. International capital accounted for 45% of the total volume of transactions, with investment into the UK being spearheaded by the US with a total of £11 billion. But the report shows that investment into UK commercial real estate from the Middle East dropped dramatically by 62% to £1.6 billion, the lowest level since 2012, and it says that this is largely attributed to the collapse in oil prices and the political uncertainty in the region. In contrast, Far Eastern investment increased by 62% in 2015 to £6.4 billion as investors from Singapore and Hong Kong in particular flocked to the relative safe haven of the UK. ‘Despite it being a record year for international capital investing in UK commercial property, we have started to see signs that the market is slowing down. Total investment in the second half of 2015 was down 19% compared to the second half of 2014,’ said Richard Yorke, director of market analytics at CoStar. ‘With 2016 beginning with severe stock market volatility, heightened worries about China’s economy, falling oil and other commodity prices, and uncertainty about the UK’s place in the European Union, total investment may continue to ebb,’ he added. The report also show that demand for alternative assets such as hotels and students accommodation rose strongly in 2015. A sum of £5.5 billion was spent on hotels in 2015, a 47% increase on 2014 making it the strongest year ever. In addition, £4.3 billion was invested in student accommodation, more than double the level invested in 2014 and the strongest year on record. In terms of sector, offices dominated with £29.5 billion spent… Continue reading
New home building not keeping up with demand in UK
Demand for rented homes in the UK is set to grow by 1.1 million over the next five years despite various government policies to boost home building, according to new research. The Government has a target of building 400,000 new affordable homes for sale over the course of this parliament, but an additional 220,000 homes for rent a year are still needed, according to new analysis from real estate adviser Savills. It’s report says that while policy will curb some of the demand for rented homes, demand is still going to be high as the economic recovery and ongoing low interest rate environment have done little to reverse the growing need for rented housing. Rather, house price inflation ahead of wage growth has served to push home ownership further out of reach for many, at a time when stock in the social rented sector has actually shrunk, by 2.8% in the past five years, pushing more households into private renting. According to the English Housing Survey, private renting has been growing by 17,500 households per month on average over the 10 years to 2014. Government housing policy, including Starter Homes, a greater number of Shared Ownership homes and access to larger equity loans through Help to Buy London, seeks to reverse this trend by helping people access the property ladder. ‘But demand for rented homes could still rise more sharply than we have forecast. We would question whether policies can accelerate house building enough to see the Government’s target of 400,000 affordable homes for sale reached in the timescale set,’ said Susan Emmett, director of Savills residential research. ‘And given the overlap between the different schemes, each focused at similar parts of the market, it is possible that one scheme could simply replace the other rather than providing additional homes,’ she explained. ‘This analysis demonstrates that we still need to provide a substantial number of homes for rent. Government policy should focus on supporting the development of new homes to rent as well as to buy,’ she added. Instead, as the need for rented homes grows, so recent policy announcements are set to constrain the supply of rental homes. The introduction of a stamp duty surcharge of 3% on buy to let properties and the restriction on tax relief on mortgage interest payments are likely to limit the ability of private investors to expand their portfolios, the report says. This presents a major opportunity for large scale institutional investors to step into the gap, with expectations that they will remain exempt from the tax changes and become increasingly attractive sources of bulk finance for developers. It also points out that investors are looking both in London and beyond to cities with high and growing concentrations of households in the private rented sector. The Savills investment matrix highlights Manchester, Reading, Edinburgh… Continue reading
US home foreclosures continuing to fall, latest data shows
Foreclosures in the United States are continuing to decline with the latest data showing they fell 30% in December year on year, the sixth consecutive month with an annual decrease in foreclosure starts. However, the figures from real estate data firm RealtyTrac also shows that bank repossessions (REOs) in December increased 65% from a year ago, the 10thconsecutive month with an annual increase in REOs. ‘In 2015 we saw a return to normal, healthy foreclosure activity in many markets even as banks continued to clean up some of the last vestiges of distress left over from the last housing crisis,’ said Daren Blomquist, vice president of RealtyTrac. ‘The increase in bank repossessions that we saw for the year was evidence of this clean up phase, which largely involves completing foreclosure on highly distressed, low value properties,’ he explained. ‘Meanwhile, local economic problems became a larger driver of foreclosure activity in 2015 Examples of this are Atlantic City, New Jersey, which posted the nation’s highest metro foreclosure rate for the year, along with several heavy oil-producing markets in Texas and Oklahoma where foreclosure activity increased in 2015, counter to the national trend,’ he added. Counter to the national trend, 24 states and the District of Columbia posted an increase in foreclosure activity in 2015 compared to 2014, including Massachusetts up 55%, Missouri up 50%, Oklahoma up 36%, New York up 24% and Texas up 16%. Among the nation’s 20 largest metro areas, six posted year on year increases in foreclosure activity in 2015. In Boson they were up 44%, up 38% in St. Louis, up 25% in Dallas, up 22% in Detroit, up 9% in New York and up less than 1% in Houston. A total of 569,835 properties started the foreclosure process in 2015, down 11% from 2014 and down 73% from the peak of more than 2.1 million foreclosure starts in 2009 to a 10 year low. Bucking the national trend, foreclosure starts increased in 2015 in 16 states, including Oklahoma up 92%, Massachusetts up 67%, Missouri up 28%, Virginia up 23%, Nevada up 14% and Arkansas up 14%. A total of 449,900 properties were repossessed by lenders in 2015, up 38% from 2014 but still 57% below the peak of nearly 1.1 million bank repossessions (REOs) in 2010. The median price of a bank owned home in 2015 was 41% below the median price of all homes, the biggest bank owned discount nationwide since 2006. ‘That may be surprising to some, but demonstrates that in a healthy real estate market foreclosures are no longer mainstream, but instead are back to being a market niche of properties with problems that many buyers do not want to tackle,’ said Blomquist. Bank repossessions (REOs) increased from a year ago in 41 states and the District of Columbia. Some of the biggest increases were in New Jersey which was up 226%, New York up 194%, Texas up 115%, North Carolina up 108%, and Oregon up 96%. Foreclosures in… Continue reading
