Prime central London sales down 14% year on year
Monday, 16 November 2015
[Image] Sales levels across the prime central London property market have fallen by 14% year on year from the third quarter of 2014 but the rate of change is slowing, according to a new report.
The regular analysis report from W.A. Ellis points out that the annual rate of change is an improvement from the first quarter when transactions were falling at an annual rate 27%.
It also shows that the average price paid per square foot across the prime central London sector now sits at £1,832 up by 1.4% over the third quarter of 2014.
However, the very top of the market over £5 million has already witnessed the greatest correction in prices with flats and houses being sold for 11.5% less per square foot than in the third quarter of 2014.
‘It would appear that the bubble may already have burst in prime central London but the effect is not as decimating as reports from UBS and Deutsche bank suggest. The government’s intervention in December 2014 by raising Stamp Duty has indeed cooled the very top of the market and the continuous upward spiral has been halted,’ said Richard Barber, the firm’s director.
He pointed out that 36% of all properties currently on the market across the sector are now being marketed at a lower price than they were originally listed at, with the average reduction in price being 8.5% of the original asking price.
‘Continuous capital growth in any market is an unrealistic expectation. However, we believe that the correction has already happened and the above statistics bear this out. Whilst there continues to be pessimistic outlooks on the market supported by strong economic arguments, market activity suggests a different story,’ Barber explained.
‘Affordability will undoubtedly remain the key issue within prime central London but news that the population of the UK is likely to grow by 4.4 million in the next 10 years, will undoubtedly impact on both the letting and sales market. This unprecedented level of population growth will prove to be a continuing factor within the supply and demand chain’ he added.
Meanwhile, in the lettings sector the report says that the short term outlook for the rental market is looking positive as supply continues to outgrow demand over the next few years. Across Greater London, the firm predicts rental values will increase by 5% in the next year and by 21.7% over the next five years to the end of 2020.
Within prime central London, the firm predicts a rise of 3.5% over the coming year, with a slightly more modest prediction of 15.9% over the next five years, which Lucy Morton, head of residential agency at JLL Kensington says still represents a very healthy growth in rental values.
‘This outlook is particularly pleasing given that rental growth over the past two to three years has been minimal in some areas. As demand for rental property continues to rise, the supply of available accommodation is also under threat from the recent withdrawal of tax relief for buy to let landlords. This may result in some landlords, particularly those who are higher rate tax payers with large mortgages on their rental investment, choosing to sell. This will contribute to the predicted increase in rental values,’ she explained.
She also pointed out that despite Government policy being more supportive of owner occupation, initiatives aimed at helping people onto the property ladder are still insufficient to help the vast majority of tenants overcome onerous deposit requirements and affordability criteria, so most will continue to rent.
‘The proportion of people living in privately rented accommodation has increased over the past ten years, with almost half of 25 to 34 year olds now living in rented accommodation, compared to just over 20% 10 years ago. Additionally, the UK economy is stronger than it has been in recent history, with unemployment continuing to decrease and average earnings currently increasing faster than over the past ten years. These conditions will allow more and more young people to move out of their family homes,’ she said.
She also pointed out that the market traditionally slows down at this time of year and the firm agreed twice as many new tenancies in the first half of October as in the second half. ‘This means for those landlords looking for tenants, good presentation is essential to ensure that tenants prefer your property to the competition,’ she added.
More British buyers in the prime London property market, research suggests
|Thursday, 19 November 2015|
| Domestic buyers have risen to a new level of prominence in the London property market as overseas purchasers are being put off by current property tax levels, it is claimed. |
In the third quarter of this year some 79% of property purchases were made by domestic UK buyers, up from 75% a year ago, according to the latest London Property Monitor from March & Parson.
The firm says that sales activity from domestic buyers has surged forwards to fill the gap left by overseas buyers and investors, who have been left more cautious by the strong sterling, stricter Government measures on non-domicile status, and heftier Stamp Duty for higher value purchases.
This pattern is also being mirrored in the prime central London market traditionally favoured by overseas investors, with the proportion of foreign buyers standing at 32%, down from 34% in the second quarter and 37% a year ago.
The investor share of the market has also dipped in the prime central London market over the past three months. Investors accounted for 35% of all prime central London sales during the third quarter, a considerable drop from 42% in the second quarter.
‘This has cast some shadows over the capital, but the millions of Londoners who live and work in the city have acclimatised much more quickly to the property taxation changes, and have risen up to fill the void left by overseas purchasers and investors,’ he pointed out.
‘We’re noticing longer purchase chains than ever as domestic buyers really start to dominate the market, and demand is really putting a strain on supply. This should ensure that London houses prices and sales activity continue their ascent into 2016,’ he added.
But taking into account the much faster gains in the outer prime London market over the last two years, the premium a home buyer can expect to pay to live in prime central areas is in long term decline.
Indeed, since the third quarter of 2013, house prices in outer London have soared 12.6%, equal to £131,000, and this has narrowed the price gap significantly between homes in prime central and outer London.
‘Properties in the traditional prime central stronghold will ultimately always hold their value, but after 24 months of relative price stagnation, it requires much less of a price leap than it did a few years previously, after such stellar price rises in the outer areas of the city,’ he explained.
‘We expect property further out from the centre to make the strongest gains before the end of the year, mirroring the trend evident across the capital as a whole. Properties at the lower end of spectrum have accumulated the strongest price momentum, and this is unlikely to dissipate,’ he added.
New home sales down month on month in Australia
Thursday, 29 October 2015
[Image] New home sales in Australia fell by 4% month on month in September, with the level of activity down from the April peak by 5.2%, the latest new data shows.
Detached house sales declined in four out of the five the mainland states with only Victoria seeing growth at 3.1%, according to the New Home Sales report from the Housing Industry Association (HIA).
They fell by 19.8% in South Australia, by 8.6% in Western Australia, by 5.9% in Queensland and by 0.5% in New South Wales. In Victoria detached house sales increased by 3.1%.
‘Following the peak level of sales that occurred in April this year, sales activity has trended lower only very modestly. This augers well for actual new home building activity in 2015/2016,’ said HIA economist, Diwa Hopkins.
‘A fresh record level of building activity during this financial year could have been achieved and could have been of strong benefit to the broader domestic economy but increasingly restrictive credit conditions are likely to curtail the boom in new home building,’ she pointed out.
‘The deterioration in credit conditions is likely to weigh more heavily on new home building activity beyond 2015/2016. We have therefore pared back our forecasts for activity over our forecast horizon beyond the end of the current financial year,’ she added.
Meanwhile, separate research shows that offshore investment into Australia's commercial property market shows no signs of abating this year. Foreign investors accounted for 28% of transaction volumes by value in 2014 and already in the first half of 2015 the level is 27%.
The Australian market is remaining attractive to offshore buyers, as commercial real estate assets continue to provide relatively high income returns in global context, according to the report from real estate firm JLL.
It points out that Australian office assets are attractively priced for investors seeking high yielding, stabilised assets in a mature market, comparing well against major cities in Europe, Asia, and America. And even taking into account localised differences such as higher rent free incentive levels in Australia, yield spreads still favour the Australian market.
‘In Australia, yield compression has continued unabated, especially for prime grade assets, across all sectors and many markets. The weight of capital remains significant and the global portfolio tilt toward real estate continues,’ said Simon Storry, JLL's head of International Investments Australia.
While 2014 was a record level of foreign investment into Australia, at the half year mark, 2015 levels are close to the record 28% of transaction volumes recorded in 2014. Storry said that the depreciation of the Australian Dollar has allowed offshore investors to be far more competitive and they seem to have a much greater desire to deploy substantial pools of capital in what they see as an undervalued market globall
NZ prices up year on year but down month on month, latest index shows
Wednesday, 18 November 2015
[Image] Residential property sales in New Zealand increase by 18.6% year on year in October but where down 4.1% compared to the previous month, according to the latest index figures.
The national median price was $460,000, up $30,000 or 7% on October 2014 and down 5.1% on September, the data from the Real Estate Institute of New Zealand shows.
Excluding the impact of the Auckland region, the national median price rose $28,500 to $370,000 compared to October 2014 to reach a new record high and rose 1.4% on September.
There was a new record national median price excluding Auckland of $370,000, up 8.4% compared to October 2014 and up 1.4% on September and new record median prices for Northland, Manawatu/Wanganui, Wellington and Nelson/Marlborough.
But the market paused in Auckland with a year on year rise of 16.8% with month on month median prices down by 3%.
The data also show that there was a 57% rise nationwide in the number of sales over $1 million year on year and a 47% rise in the number of properties sold by auction.
‘The drop in the number of sales in Auckland in October is the result of a softening of demand over the past few months and the new IRD and bank account rules introduced at the start of October,’ said REINZ chief executive Colleen Milne.
‘However, the fundamental supply and demand drivers of the Auckland market remain in place, and the result for October is indicative of the market adjustment phase as it adapts to these new requirements,’ she explained.
‘Elsewhere across the country we are seeing increasing demand and rising prices as buyers of all types emerge to take advantage of low interest rates. It is further evidence of the halo effect of Auckland based buyers searching for value in regional markets,’ she pointed out.
‘During winter and into early spring, the property markets in a number of regions have been far more active than would normally be expected, thus a slowdown or pause is not surprising following this burst of activity,’ she added.
Overall 10 regions recorded increased sales volumes compared to September, with Central Otago Lakes volumes growing 31%, followed by Southland with 21% and Canterbury/Westland, 15%. Compared to October 2014, all regions recorded increases in sales volume, with Waikato/Bay of Plenty recording the largest increase of 54%, followed by Hawke’s Bay with 52% and Central Otago Lakes with 50%.
On a seasonally adjusted basis, the national median house price fell 5.5%, indicating that prices fell slightly more in October than would normally be expected at this time of year.
Northland, Manawatu/Wanganui, Wellington and Nelson/Marlborough all reached new record median prices in October. Northland recorded the largest percentage increase in median price compared to October 2014, at 18%, followed by Auckland at 17% and Taranaki at 12%.
Hawke’s Bay recorded the largest percentage increase in median price compared to September, with a 9% increase, followed by Northland with 7% and Nelson/Marlborough with 5%.