Tag Archives: finance-update
Developers struggling to meet demand for luxury homes in London
The number of luxury homes currently being planned or under construction in London hit a record high this year, with around £60 billion of properties currently due to be delivered over the next decade. This is a 20% increase on 2013. However, with significant capacity issues at every level of the capital’s construction industry, a huge proportion of these properties are unlikely to be built on time, according to a new report from EC Harris. It reveals that this year, the capital’s 10 year pipeline of high end property has grown by around a quarter to a record 25,000 homes. However, with developers and investors struggling to keep pace with seemingly insatiable buyer demand, up to half the new homes planned in the next five years could end up falling well behind schedule due to a lack of available contractors to deliver the required quality of work. ‘With the UK economy back on track and London deemed a safe haven for international property investors, it’s not surprising that demand for luxury homes is fuelling ever increasing development,’ said Mark Farmer, EC Harris head of residential. ‘Where we are starting to observe real problems, though, is in the construction process. There is simply not the capacity out there to meet demand and many projects will undoubtedly fall by the wayside or experience delivery difficulties due to sheer lack of resources,’ he explained. ‘Many developers and investors, when in a position to do so, are therefore looking to jump the queue and are paying premiums for construction so they can deliver on promises they have already made to their purchasers,’ he added. In terms of location, the South Bank is proving the most popular area of the capital for development, accounting for around a third of new projects. This is closely followed by Chelsea and Fulham and the City. The report points out that the appetite for high end residential property continues to reach well beyond the traditional West End heartland, with high profile developments such as One Blackfriars and Bishopsgate’s Heron Plaza demonstrating the spread into a much broader swathe of central London. Therefore, to avoid losing out on investment returns in the current strong sales market, some developers are being forced to pay premiums to contractors in order to secure their services. It concludes that this rush to market has provoked significant price inflation in the construction sector as developers seek to urgently get building work underway with the best available tradesmen and project delivery expertise. Continue reading
House sales in Scotland reach six year high but independence could affect growth
House sales reached a six year high in Scotland with monthly growth of 0.2% in July but slowing supply is on the horizon, according to the latest index. Over half of Scotland actually saw prices drop in July and home values are still 0.6% off the 2008 peak while sales remain 30% lower than pre-crisis levels, the LSL/Acadata index also shows. But first time buyer activity fuels new record prices in Aberdeenshire and Edinburgh and the average house price was £164,483 in July, up 5.7% from a year before. According to Richard Sexton, director of e.surv chartered surveyors, part of LSL Property Services, a favourable lending environment boosted demand over the summer. ‘There were 9,285 transactions in July, climbing 5% up from June to reach the highest monthly total since July 2008,’ he said. He believes that this propelled prices to new peaks in July in some of Scotland’s centres of employment with Aberdeenshire and Edinburgh seeing transactions soar 20% and 25% respectively over the past year. But on the other side of the coin, uncertainty is leaving its trace and squeezing supply has seen slower overall transactions growth compared to last year. ‘Higher up the chain any prospective sellers with the luxury of time are hanging on to see which way the tide turns before they put their home on the market,’ he added. However, he warned that depending on the outcome of the referendum on Scottish independence later this week, this could reverse rapidly. ‘There is a chance of a mass take-off and sale of investments, which would disrupt house prices in the short term,’ he said. ‘Scotland’s housing market recovery is still in the delicate stages of rehabilitation, and the number of completed sales in the last 12 months still only represents 70% of the average over the period 2004 to 2007. Ambiguity surrounding Scotland’s future isn’t helping. We are in the throes of the longest period of sustained monthly house price growth since February 2007, but only time will tell whether this recovery will be derailed,’ he explained. ‘A Yes vote would usher in a further 16 months of uncertainty. A Scotland outside the UK would open the floodgates to the real questions of currency, exchange rates, mortgage risk, and property taxation. Many mortgage holders could see their LTV shoot up as the implications of borrowing from a bank in a foreign country are unmasked. A No vote doesn’t guarantee clarity either but the mist of ambiguity would clear sooner,’ Sexton pointed out. ‘Whichever way the chips fall on Friday morning, two million unhappy people will wake up in a divided Scotland, with a rift carved through society. This division will not easily be overcome, and it is the job of businesses to keep calm and carry on as usual. In the aftermath of the biggest decision Scotland will ever have to make, everybody will benefit from swift answers to our questions, regardless of the final word from the ballot boxes,’ he concluded. Continue reading
Estate agents see signs of improved property supply in the UK
A sharp rise in home owner equity in the UK is set to increase the property supply as even first time buyers in London seem undeterred by property price increases, it is claimed. Indeed, the latest data from haart estate agents shows that first time buyers in London reached a new annual high with registration up 55.3%. This comes at a time when UK property prices have increased 7.9% annually to £191,375, while in London prices are up year on year by 23.6% to £474,359. The firm also says that the national property market is buoyant with a 21.3% increase in property sales. ‘Home owners across the UK, who have on average accumulated equity of over £14,000 in their property over the past year, are expected to take advantage of their growing assets by remortgaging or downsizing this spring,’ said Paul Smith, chief executive officer of haart. ‘The downsizers will ease the current shortage of supply which will help to quell rising house prices. The increase in equity is now more than £90,000 annually in London. First time buyers are undeterred by property price rises and are now at their highest level in London over the past 12 months as banks continue to support lending to this group of buyers,’ he explained. He also said that a lack of reform for the much criticised Stamp Duty property tax means the continuation of a dysfunctional housing market. ‘In one fell swoop the Chancellor George Osborne could have increased the supply of homes for sale and capped rising house prices helping every level of the housing ladder,’ Smith pointed out. ‘Instead he’s turned a blind eye and given nothing to the majority of home buyers and sellers rather than throwing them a lifebelt,’ he added. Continue reading
