Property Investment

Investment in U.K. Residential Property Up 150% Despite Brexit

by International Commercial Investment on August 1, 2019

Source: Bloomberg

The uncertainties of Britain’s departure from the European Union hasn’t stopped investors from backing the U.K.’s residential sector.

Total investment volumes in the U.K.’s multifamily sector rose by more than 150% to 6.8 billion euros ($7.6 billion) in 2018, according to a report by broker JLL. London helped lead the charge, with investment volume nearly doubling to 2 billion euros compared to 2017.

That helped the U.K. capital rise to become the fourth-biggest European city for multifamily investment, behind Berlin, Copenhagen and Paris.

Investment in European multifamily properties rose by 40% to 56 billion euros in 2018. The market has proved popular among investors because of the stable cash flow from such buildings and a shortage of supply in Europe’s top-tier cities.

Still, the U.K.’s charge may be shortlived as the uncertainty around Brexit continues to mushroom.

“Given the lack of progress with Brexit, some foreign investors have become more cautious when considering a market entrance,” JLL’s Simon Scott said in the report.

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International Commercial InvestmentInvestment in U.K. Residential Property Up 150% Despite Brexit

Property market optimistic about new Prime Minister in the UK

by International Commercial Investment on August 1, 2019

Source: Property Wire

New Prime Minister Boris Johnson could be positive for the UK’s property market, particularly if he delivers Brexit on time and reforms stamp duty, according to industry commentators.

Although change may not come quickly as it is likely he will focus initially on getting Brexit sorted out, although that on its own will give more certainty to the housing market. The overall feel is that he will inject more enthusiasm into the sector.

‘Brexit has continued to be something of a grey cloud that has loomed over the top end of the market for nigh on three years now and continues to be the driving force behind its instability, particularly in prime central London,’ said Lisa Simon, head of residential at Carter Jonas.

‘Promises from Johnson around the relief of onerous taxes is a potentially positive move for the market but this all hinges on whether or not the new Prime Minister can hold his position and prevail against the opposition in the event of a general election,’ she explained.

She believes that it might be better to adopt more of a Jeremy Hunt mindset and she thinks his proposed policies would have served home owners well. ‘Hunt’s plans to put more steam behind the private rental sector and allowing councils to buy land, to commission more homes at a price people can afford, would have made home ownership more accessible to aspiring first time buyers in the capital and so Johnson should consider bringing Hunt’s vision for housing to life under his own leadership,’ she pointed out.

‘Johnson’s intentions to generate more movement in the top end should clear some of the blockages further down the chain but home ownership and affordability in the mass market is still an issue that is yet to be addressed in the right way. While benefits to the top end should filter down, Johnson should be driving forward policies that tackle challenges in the middle and lower end of the market more head on,’ she added.

According to Camilla Dell, manging director at Black Brick, a move to reverse the stamp duty increases put in place by George Osborne, when the top rate increased from 7% to 12%, would be very good news, particularly for the London market which has been suffering from an onslaught of tax hikes on property since the end of 2014.

‘There is now clear evidence that the stamp duty increases have started to dent the tax take. We would welcome a review of current property taxation, particularly the 3% surcharge and proposed 1% additional charge on foreign buyers, which has had the effect of pouring glue into the market and resulting in a dramatic fall in the number of transactions happening on an annual basis,’ she explained.

‘Furthermore, a move to cut stamp duty on homes below £500,000 would clearly benefit the first-time buyer market. In our opinion, this should only apply to first time buyers and not investors. However, the market needs to treat promises made by Boris Johnson with real caution,’ she added.

Robert Nichols, chief executive officer of Portico estate agents, pointed out that it is no secret that stamp duty hampers household mobility and the higher the tax, the more difficult it is for people to move and keep the market moving.

‘We saw the market go into standstill when George Osborne hiked up stamp duty for homes valued at £925,000 or more in 2014. There was a huge spike in volume as investors and second-home buyers rushed to buy properties before the stamp duty changes came into effect in April,’ he said.

‘But as quickly as volumes went up, they came down again dramatically and in Westminster, prime central London, we saw volumes drop to below 100 transactions in a month to a record low of 84. If Boris Johnson does reduce stamp duty, it would certainly invigorate the top end of the property market and we should see transactions increase,’ he added.

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International Commercial InvestmentProperty market optimistic about new Prime Minister in the UK

Property market remains resilient as June sees a drop in new listings

by International Commercial Investment on July 4, 2019

Source: Property Reporter

According to the latest data released by online estate agent, Housesimple, the number of new property listings across the UK fell by 1.9% in June 2019.

However, positively the index recorded more than 60,000 new listings for the second month in a row, as sellers continue to take advantage of the summer months and a reduction in Brexit uncertainty to market their properties.

Last month 61,775 new properties came onto the market across the country, down from 63,001 in May 2019. The biggest falls were in the South East and South of England, where new listings fell by 11.1% and 8.7% respectively in June 2019.

The towns and cities leading the decline in new property listings included Canterbury in the South East (-31%) and Truro in the South of England (- 30.3%). Warwick (-29.7%) and Shrewsbury (-29%) in the West Midlands also saw significant reductions, along with Huddersfield in Yorkshire (- 26.5%).

Yet despite most of the UK experiencing a steady deceleration in property listings, the North West bucked the trend.

The number of new properties for sale in the region increased by 3.92% from May 2019 to June 2019. Bolton (95.5%) and Bootle (283.5%) dominated this growth in the North West, with the number of new listings in Salford (7.7%), Liverpool (6.3%), Rochdale (5.9%) and St Helens (1.5%) also increasing from May to June.

London also defied the summer slowdown, reaching a level not yet seen all year. New supply was up 2% compared to the month prior, rising from 24,607 in May 2019 to 25,106 in June 2019. Just 10 of the 32 boroughs saw new supply levels fall last month. Newham and Lambeth were the best performers, with a respective 17.1% and 16.4% lift in new homes for sale.

The Housesimple Property Supply Index, issued monthly, analyses the number of new properties listed each month by estate agents across more than 100 major UK towns and cities. Year-on-year the number of new property listings declined by 12.7% in June 2019, with a total of 70,775 new properties listed in June last year.

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International Commercial InvestmentProperty market remains resilient as June sees a drop in new listings

UK house prices gather a bit more speed in April

by International Commercial Investment on May 1, 2019

Source: Reuters

Growth in British house prices picked up slightly in April, data from mortgage lender Nationwide showed on Wednesday, adding to other signs that a slowdown in the housing market ahead of Brexit might have bottomed out.

Prices rose by 0.9 percent in annual terms, speeding up from a rise of 0.7 percent in March.

That was the biggest increase since November although it was still weak compared with recent trends in the often surging UK housing market – prices were rising by about 5 percent a year at the time of the Brexit referendum in 2016, according to Nationwide.

In monthly terms, prices rose by 0.4 percent after rising by 0.2 percent in March, also the biggest increase since November.

Economists polled by Reuters had expected prices to increase by 0.7 percent in annual terms and to rise by 0.2 percent compared with March.

Robert Gardner, an economist with Nationwide, said first-time buyers appeared to be defying the jitters around Britain’s still uncertain departure from the European Union, helped by low interest rates and the lowest unemployment rate in more than 40 years.

“While the ongoing economic uncertainties have clearly been weighing on consumer sentiment, this hasn’t prevented further steady gains in the number of first time buyers entering the housing market in recent quarters,” he said.

The number of mortgages taken out by first-time buyers was approaching pre-financial crisis levels, the data showed.

While prices have been rising across the country as a whole, prices in London have fallen according to various measures of the market, hit by a combination of unaffordable prices for many buyers, tax changes affecting the buy-to-let market and the Brexit uncertainty which has weighed heavily on the capital’s financial services industry.

British Prime Minister Theresa May last month secured an extension to the Brexit deadline until Oct. 31, avoiding the potential shock of a no-deal Brexit for now but leaving the world’s fifth-biggest economy still deep in uncertainty about how it will leave the EU.

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International Commercial InvestmentUK house prices gather a bit more speed in April

‘Generation Rent’ is reshaping the UK property market

by International Commercial Investment on April 1, 2019

Source: Business Leader

Two of the big trends transforming the British property landscape today are the rise of ‘Generation Rent’ and the falling number of retail stores on UK high streets. Both are leading to a radically changed outlook for businesses in urban areas.

For property investors, owners and occupiers, the combination of these two shifts provides genuine hope for the revitalisation of the high street. What we are seeing is that UK town and city centres will increasingly become a place to live, work, play (and shop), as ‘Generation Rent’ is stimulating increased demand for residential rentals in these areas.

The most recent MRI Software research into the UK marketplace shows that city and town centres are where ‘Generation Rent’ – the Gen Z and Millennial renters who have been priced out of the home purchase market – want to live. Nine in ten (91%) of the top executives and managers in the property sector surveyed by MRI say ‘Generation Rent’ prefer to live in town and city centres, so they can have easy access to amenities that suit their lifestyle – such as gyms, cafes and bars, shops and services.

Rising house prices may be a root cause of preventing younger generations from being able to step onto the property ladder – but it’s also the case that as more people rent and the market expands, so too does the choice and quality available. Indeed, a recent Knight Frank report revealed that more than 10% of tenants say renting enables them to live in an area they could not otherwise afford. The result is renting becomes a more attractive proposition and a longer-term choice.

We are seeing, increasingly, that the standards ‘Generation Rent’ are demanding in rental accommodation promise to reshape the market and bring in a new level of professionalised property management. Four out of five (82%) of the senior property professionals surveyed say ‘Generation Rent’ is here to stay with little likelihood buying conditions will improve.

A greater demand for high-quality residential property, close to retail and leisure outlets, is music to the ears of investors and owners with interest in urban property. According to the MRI survey:

  • 82% of say projects to redevelop former retail premises to create mixed-use properties, including residential, will be a lucrative opportunity over the next 12-18 months
  • 72% see residential development former retail premises as the route to giving the British High Street “a new lease of life”
  • 90% say residential rentals in UK town and city centres will become increasingly important for property owners

This trend is demonstrated by news in recent months that major property players such as Intu, Aberdeen Standard Investments and Redevco are committing significant resource to residential development in these types of areas in the UK. In fact, two-thirds (66%) of the senior property professionals surveyed think ex-retail property could be the biggest untapped resource for new residential development in the UK. What’s more, increasingly we are seeing these recognised names turn their attentions to potentially lucrative ‘Build-to-Rent’ developments in UK towns and cities.

And how does this help retail? While the challenges faced by the sector won’t be solved overnight by an ongoing shift to residential, the trend will provide a significant boost to property owners with premises along Britain’s beleaguered high streets. Additionally, in the long term, more people living in town centres will enhance opportunities for occupiers of retail space – and other physical locations such as coffee shops, health clubs and entertainment venues.

Ultimately, much of what we’re talking about here is future opportunity. For investors, owners and occupiers of mixed-use space to all realise the benefits, there will have to be a level of collaboration and that has perhaps never been seen before in the UK property sector.

Technology, which is a pillar of the flexible ‘work, live, play’ culture that is driving the change, will play a major role in enabling all of the stakeholders to manage the transition and build a successful and sustainable model. With these systems in place, organisations can turn data into genuine insight to truly understand what facilities and services prospective and existing tenants want – and whether, for example, a downstairs coffee shop or a gym will drive higher rents and occupancies.

This level of diversification will not be without its challenges, but if businesses are willing to adapt, then the potential benefits are there for all to see.

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International Commercial Investment‘Generation Rent’ is reshaping the UK property market

Overseas money still piling into the UK property market

by International Commercial Investment on December 11, 2018

Source: Investors Chronicle

Potential housebuyers in the UK seem to be sitting on their hands right now, and you can guess any number of reasons why, from Brexit to interest rate worries or concerns over the health of the UK economy. Overseas buyers don’t quite see it that way, and this year a third of all homes bought in the UK for £1m or more were snapped up by foreign investors as second homes.

Forget about higher stamp duty and capital gains liabilities, investors from Russia, the Middle East and the Far East especially are homing in on the UK and London in particular. Some of the attraction comes from the fact that expensive homes have fallen in value, which for an overseas buyer comes on top of sterling weakness. So, it’s good news at the Treasury because in the past year the percentage of stamp duty income gathered from second home buyers in this price bracket has jumped from just under 30 per cent to 50 per cent. In fact, income generated through the additional 3 per cent stamp duty has risen by over 20 per cent in 2018 so far to over £4bn. And if you include houses in all price brackets, over 40 per cent of total receipts came from second home purchases.

London has always been seen as a handy place to park funds because it is relatively safe both politically and economically. But these funds are also being put to work because three-quarters of overseas purchases were made for buy-to-let. More than a quarter of second homes worth over £1m were bought in London, with the largest amount of stamp duty generated in Westminster at £594m.

Back in the real world, the number of existing homes coming on to the market is very close to an all-time low, with sales volume either flat or negative across 11 of the UK’s 12 regions. At the same time, tenant demand for rented properties is holding up well, but rents could be pushed higher because the number of landlord instructions has continued to fall, recording the 10th straight quarter of decline, the longest negative stretch since the series was created in 1999, according to the Royal Institution of Chartered Surveyors.

Looking a little further back, however, shows that real rents adjusted for inflation have fallen 2.2 per cent in the past 10 years, according to Countrywide (CWD) subsidiary Hamptons International. In that time, rents have risen by 22 per cent but inflation has climbed 24 per cent. That inflation outpaced rental growth to some extent reflects the fact that the start of the 10-year period covered the wake of the financial crash, which gave landlords little opportunity to push rents higher. The east of England and London are the only regions where rental growth has outpaced inflation, whereas in the Midlands real rents over the 10-year period fell by 7.8 per cent. However, rental growth on new-let properties reached 2 per cent in October this year, the highest level since February, as every region recorded a rise in rents. The biggest gain came in the east of England at 3.9 per cent. And even London chipped in with the second monthly gains in a row, giving a year-on-year increase of 1.4 per cent.

Given the current atmosphere of uncertainty, the gains may seem puzzling, but the reality could be that rents are climbing because supply is falling. As more small landlords exit the market following heavier taxation, the number of homes for rent is falling just at the same time as demand is increasing.

It may well be that the government is leaning towards bigger corporate landlords making up the shortfall, and steps have also been taken to stimulate more government-funded social housing. Major housebuilders are also getting in on the act, by forming partnerships with local authorities to build on council-owned land, while a number of private institutions are forging ahead with build-to-rent schemes through forward funding arrangements with housebuilders. The big question now is whether this will all be enough to fill the gap. With supply in continued decline, rents are forecast to rise by 15 per cent over the next five years, which is generally bad news for tenants. Especially so because since 1991 the number of homeowners between the ages of 16 and 34 has dropped from 51 per cent to just 24 per cent, while renters in the same age group have risen from 56 per cent to 73 per cent.

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International Commercial InvestmentOverseas money still piling into the UK property market

Growing young populations will influence UK property hotspots in 2019

by International Commercial Investment on December 11, 2018

Source: Buy Association

On a positive note, it identified that property investors in 2019 should look to key regional cities that will offer ‘Brexit-proof’ investment potential.  Underpinning these important metropolitan hotspots is a trend for inner city urban living and growing youthful populations which will provide an ongoing supply of would be homebuyers and tenants.

Surrenden Invest believes that the UK is as prepared as it can be to ensure that property investment continues as business as usual in the year head.

Jonathan Stephens, managing director at Surrenden, said, “Nobody can ever see what the future holds, that’s the case regardless of Brexit. As such, looking ahead to likely investment hotspots is a case of examining the underlying market fundamentals.

“For 2019, that means cities with youthful populations and strong trends for city centre living. The UK’s rental sector is still growing, so 2019’s hotspots will be those areas in which populations are expanding rapidly, and where employment prospects are sound.”

2019 property investment hotspots

By 2041, Birmingham’s population is set to rise by 14.5% reaching 1,313,300; it currently stands at 1,147,300.  Already boasting a 65,000-strong student talent pool across five university campuses; the city has the sixth highest graduate retention rate of any city in the UK.  As a result, Birmingham benefits from a vast pipeline of future workers and entrepreneurial talent.

In the last five years Birmingham has seen property prices rise by 29.46%.

As the city centre continues to expand the demand for quality new build homes and developments will continue to attract attention; exciting new scheme like Westminster Works in prime locations are and will be, in high demand.

Manchester is mirroring Birmingham’s growth

Manchester is in line to see the population rise by 14.1% increase between 2018 and 2041 with property prices up by over 30 % since 2013. It is already ranked (as part of the Manchester-Liverpool metropolitan region) in IBM’s list of top ten global destinations for foreign direct investment in 2017.

The city is second only to London in terms of its graduate returners running at 58%, as well as its influx of graduates with no prior connection to the city. Amazon chose Manchester as the site of its first Amazon Academy, running a series of programmes and events designed to help hundreds of small, local businesses.

Creative young professionals will be sure to look to future residential developments in the city centre such as Ancoats Gardens, to immerse themselves in Manchester’s community.

Over the next 25 years or so, London’s population is projected to increase by 15.4% which will push up demand for housing across the capital.

Over the past five years London property prices have risen by 32.36%. According to PWC, 60% of Londoners will rent their homes by 2025, with the city’s professionals renting in higher numbers.

Liverpool is on track to experience a population increase of 12.0% between now and 2041 seeing its current population of 495,300 grow to 554,500 in 2041.  The city’s booming service sector, healthcare sector and knowledge economy attracts talented young professionals;

42% of Liverpool’s population are under 30 compared with a UK average of 37%.

It is a city driven by youth and an entrepreneurial movement that has accelerated a major regeneration.  Centrally located developments such as The Tannery aim to provide contemporary housing within easy reach of Liverpool’s rich cultural scene.

According to Centre for Cities, Newcastle city centre enjoyed population growth of 112% between 2002 and 2015. It projected population in 2041 is 318,100 from 297,400 in 2018.

The massive spike in demand for city centre living is creating a hotbed of innovation within the housing sector, as developments compete to attract a younger generation, who work in the city and want prime housing in the heart of Newcastle.

Student numbers at Newcastle University have shot up by over 70% since 2000, while Northumbria University has seen student numbers expand by over 114% over the same period. With nearly 50,000 students in total, a full sixth of the city’s population is engaged in study with many choosing to remain living in the city after graduating.

Jonathan Stephens, Managing director at Surrenden Invest said:

“Each of these cities has its own distinctive culture, which is drawing in young people who will ultimately contribute to the future success of that city.

“Those working in the housing sector need to respond accordingly, delivering high quality homes in central areas, in order to meet the demand that these young people are driving.”

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International Commercial InvestmentGrowing young populations will influence UK property hotspots in 2019

Surge in London house building set to drive new UK homes to 11-year high

by International Commercial Investment on November 2, 2018

Source: City A.M

London is set to drive a surge in UK house building as the industry prepares for the number of new homes being built to hit an 11-year high.

Large-scale developments and private sector rental demand are set to drive the number of new house builds in the capital up by 141 per cent, according to data about new homes registered by UK builders in the three months to September.

This jump will underpin a 15 per cent rise in new homes across the UK, the National House Building Council (NHBC) said, with 43,578 properties set to be built – the largest number since before the financial crisis.

Steve Catt, senior regional director for England at NHBC, said: “The industry has enjoyed a good quarter, with the main growth for England driven by the strong numbers coming through in London and the south east.”

“There was also considerable growth for Yorkshire & Humberside and the south west when comparing registration numbers from the same period last year,” he added.

“Both the private and affordable sectors performed well and the signs are looking good for the final months of the year.”

The news comes as London’s property market has faced a recent slump, after house price growth slumped to a five-year low last month, according to Nationwide data.

Third quarter house prices in London fell 0.7 per cent year on year, while the average UK property price increased by 2.1 per cent.

At the top end of the market, Kensington and Chelsea has seen the biggest UK price fall of 4.9 per cent to an average £1.17m over the past year.

Estate agents have cited stamp duty changes and concerns over Brexit as reasons for the slowdown in demand.

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International Commercial InvestmentSurge in London house building set to drive new UK homes to 11-year high