Property Investors Look for Life Beyond London

This article by Art Patnaude of The Wall Street Journal on October 30th, 2013 tells us that commercial real estate investors are scouring for London property market.

London's hot property market has commercial-real-estate investors scouring the rest of Britain.

Investors all but ignored cities like Manchester, Edinburgh and Birmingham while the U.K.'s economy faltered in the years after the financial crisis. They preferred the safety of London and its appeal for global buyers. But prices for office buildings and retail space have risen so much in the capital that returns on purchases are anemic.

A London property investor last month bought the site of Edinburgh's former Royal Infirmary. A complex of offices, hotels, apartments and shops is in the works. Murdo MacLeod for The Wall Street Journal.

 

Not so in the rest of the country, where even riskier development projects are proving to be a draw. Last month, London-based property investor Moorfield Group bought the site of Edinburgh's former Royal Infirmary for an undisclosed sum from Gladedale Capital, an Edinburgh-based developer. A complex of offices, hotels, apartments and shops is in the works. Development of the project, called Quartermile, stood still for much of the financial crisis.

In the past four months, real-estate investment firm Benson Elliot has spent £100 million on property in Manchester, Cambridge and the northern town of Preston.

The trend in the U.K. mirrors what has happened in the U.S. commercial-real-estate market in the wake of the financial crisis. Investors initially started buying trophy properties in the biggest markets with the most international appeal, like New York and Washington. As prices in those markets increased, demand has shifted to other cities such as Minneapolis and Denver.

Bold Move

London's property market has long benefited from the city's status as a global capital of finance and culture. Prices are stable, there is relatively strong demand from tenants, and foreign buyers like the stability of owning an asset denominated in Britain's currency.

London's appeal as a safe harbor rose during the financial crisis, and prices have continued to climb since then despite new construction. Increasingly, the city's lack of affordable options and low returns are turning investors' focus to areas they had largely ignored.

In 2012, deals outside London accounted for about 40% of all commercial property investment in the U.K. In the first half of this year, that figure edged up to nearly 50%, according to Savills, a real-estate services firm.

The largest deal in Leeds this year was the £29 million sale of the Toronto Square office complex. At the time of the sale in August, it was 20% vacant. With a net initial yield of 7%, "a year ago, this wouldn't have been an attractive proposition," said Clare Bailey, commercial property analyst at Savills.

High demand and low returns in London are "forcing people to see what can be done in the regions," said Edward Trevillion, head of real-estate research at fund manager Scottish Widows Investment Partnership, which manages £146 billion ($235 billion) of assets.

During the financial crisis, investors placed their bets in London, which is less subject to fluctuations in the U.K. economy. Many worried the economic downturn could hurt occupancy levels outside the capital.

Vacancy rates in U.K. offices jumped to 15.8% in 2009, after dropping as low as 7.1% in 2007, according to Savills. They are on the way back: Savills projects the rate to fall to 11.5% next year.

Investors looking for higher yields are focusing on places like Edinburgh, where a complex is being built on the site of the former Royal Infirmary. Scotsman/Zuma Press.

 

Confidence that a growing economy will help bolster businesses outside London has helped swing real-estate investment. While some regions are outperforming others, "all regions are sharing to some degree in the current U.K. economic recovery," said Richard Holt, regional economist at Capital Economics. The U.K. economy is expected to expand 1.5% this year, the firm projects; Scotland is expected to post 1.3% growth.

Peripheral cities is offer larger yields to commercial-property investors, who typically raise funds to buy a property and earn a yield on their investment through rents.

In London, rising prices have left yields low. In the city's financial district, the yield on office buildings peaked in January 2009 at 6.75%, not far under the 7% for property outside the capital, according to Savills. As of last month, the London yield had fallen to 4.75%; outside the capital it had only dropped to 5.75%.

Marc Gilbard, chief financial officer at Moorfield, which has £2 billion under management, said that while investors have pushed out to the regions before, this time around has been "particularly acute." That is partly due to foreign buyers seeking to buy real estate in central London as a place to park their money, he said.

There are others signs that money is flowing back outside London. Stephen Rees, head of real-estate advisory at Coutts, the private bank used by Queen Elizabeth, says competition for deals has stiffened.

On a recent commercial deal in Edinburgh, Mr. Rees—who was looking to buy the property on behalf of a wealthy client—said three of the four bidders were institutional investors. "I wasn't expecting that," Mr. Rees said. "That wouldn't have been the case the previous summer."

Investors say they still need to be cautious of occupancy levels, the reliability of tenants and the health of local economies. "You want that rent coming in every month," said Ainslie McLennan, fund manager for Henderson U.K. Property Unit Trust.

Basing an investment decision on U.K. economic-growth figures also needs to be more closely considered, said Marc Mogull, manager partner at Benson Elliot, which has €850 million of equity under management "You're not going to see fundamental growth in the regions like what you'll see in London," he said.

Article Source: http://online.wsj.com/news/articles/SB10001424052702303471004579163561521996776

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U.K. Mortgage Approvals Rise to Highest in 5 1/2 Years

This article by Scott Hamilton of Bloomberg on October 29th, 2013 tells us that on September mortgage approvals in UK rose to the highest level.

U.K. mortgage approvals rose to the highest in 5 1/2 years in September, adding to signs of a strengthening property market that’s being stoked by government incentives.

Lenders granted 66,735 mortgages, the most since February 2008, compared with a revised 63,396 the previous month, the Bank of England said in a report in London today.

Home-loan rates fell to a record low, and gross mortgage lending was 15.6 billion pounds ($25 billion), the highest since October 2008. 

Hometrack Ltd. said yesterday that house prices in England and Wales rose 3.1 percent in October from a year earlier, the biggest gain since 2007. Chancellor of the Exchequer George Osborne’s acceleration of his Help to Buy program this month is boosting real-estate activity and Hometrack said the gap between supply and demand is widening.

“The housing market is surging as low interest rates and rising confidence feed buyer interest,” said Rob Wood, an economist at Berenberg Bank in London. “It is early days, as real house prices and transactions are still below their pre-crisis levels. But the key issue is not where prices are today, rather it is where they will be in a couple of years. Prices and activity are rising fast.”

The September mortgage approvals figure exceeded economists’ forecasts. They predicted an increase to 66,000, based on the median of 23 estimates in a Bloomberg News survey. Net mortgage lending rose 1.03 billion pounds last month and consumer credit increased 411 million pounds, the BOE said.

Mortgage Rates

The BOE also reported that mortgage interest rates fell to a record low in September. The effective interest rate on all outstanding home loans fell 2 basis points to 3.3 percent. On new loans, the rate dropped 7 basis points to 3.08 percent.

Former Financial Services Authority Chairman Adair Turner has added his voice the critics of Osborne’s housing program, saying in an interview published yesterday that Britain risks repeating the debt-fueled binge that led to the credit crisis.

Despite government pledges to rebalance the economy away from consumer spending and the housing market, “we now seem to be having a recovery which is heavily focused on that favorite old British activity, which is another house price boom,” Turner said. “That’s not a sustainable, balanced economy.”

While mortgage lending is rising, approvals remain below their average of about 104,000 in the decade through 2007. BOE policy makers have cited that figure as they downplayed the risks from the housing market. Jon Cunliffe, who will join the BOE as deputy governor for financial stability next month, said on Oct. 15 that housing market is not overheating.

Corporate Lending 

Separately, the BOE said business lending rose 720 million pounds in September from August. While that compares with an average decline of 1.5 billion pounds over the previous six months, lending was still down 3.2 percent from the same month a year earlier, according to the data.

For small and medium-sized companies, lending fell 383 million pounds on the month and was down 3.2 percent versus a year earlier.

The pound remained lower against the dollar after the data and was trading at $1.6091 as of 10:28 a.m. London time, down 0.3 percent on the day. The yield on the benchmark 10-year U.K. government bond fell 1 basis point to 2.59 percent.

The BOE also said foreign investors bought a net 2.48 billion pounds of gilts in September. That followed a net sale of 6 billion pounds in August. It said M4, a broad measure of money supply, rose 0.6 percent in September from August and 2.6 percent from a year earlier.

To contact the reporter on this story: Scott Hamilton in London at
shamilton8@bloomberg.net
 
To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net

Article Source: http://www.bloomberg.com/news/2013-10-29/u-k-mortgage-approvals-rise-to-highest-level-in-5-1-2-years.html 

House Prices Rising £200 a Day

This article by Sarah Westcott of the Express on October 28th, 2013 reveals how house prices have gone up by an average of 0.5% this month.

 
House prices have risen for the ninth month in a row [GETTY]
 

Homes across England and Wales are worth 3.1 per cent more than a year ago, says property analyst Hometrack.

In the past four weeks alone, the value of the average property has soared by £6,923, more than £200 a day.

A typical three-bedroom semi is now worth £252,418.

There is still such a shortage of supply – with buyers flooding the market thanks to the Government’s Help To Buy scheme – that sellers are almost always getting their asking price.

The proportion of the asking price achieved was 95.2 per cent in October, up from 94.7 per cent in September.

This is just half a percentage point off the record 95.7 per cent at the height of the property boom in 2007.

As the resurgence continues, Halifax has also revealed that a record seven out of 10 Britons think house prices will continue to go up over the next year.

The biggest increases are in London, up 0.8 per cent month-on-month with sellers typically achieving 97.2 per cent of their asking price.

 
The value of an average propery in the past four weeks has risen by £6,923 [GETTY]

Across the country, prices were up everywhere except the North-east.

The increases were 0.1 per cent in the East Midlands and the North-west, 0.2 per cent in Wales, Yorkshire and Humberside, 0.3 per cent in East Anglia and the West Midlands, 0.4 per cent in the South-west and 0.7 per cent in the South-east.

Help To Buy, which allows buyers to secure a mortgage with a five per cent deposit, is partly driving the boom.

The other factor is the shortage of properties for sale. This month new sales listings have dropped by 1.6 per cent, while buyers registering with estate agents were up by 2.0 per cent.

Richard Donnell, director of research at Hometrack, said there is a “chronic lack of supply”.

He added: “Growth in new sales being agreed is running at four to five per cent per month and this is continually eroding the stock of homes for sale. In contrast, levels of demand have grown. Improving confidence amongst buyers has been fuelled by low mortgage rates and positive news on a recovering housing market.”

The Halifax survey reveals that fewer than half (41 per cent) think it will be good to sell their property in the coming year, compared to 57 per cent who think it will be a good time to buy.

This indicates a continuing shortage of properties, forcing prices up.

 
The recent Help To Buy scheme is partially to blame for the increase in prices [GETTY]

Meanwhile, another report reveals parents are paying tens – and sometimes hundreds of thousands of pounds – over the odds to live near the country’s top state schools.

The average price of a home in the postal districts of England’s top 30 state secondary schools is £295,972, £31,500 more than those in neighbouring areas, Lloyds Bank found.

In London, parents desperate to get their children enrolled at Henrietta Barnett school in Barnet, north London, pay £400,000 more for homes up to £863,340 inside the catchment area, compared to £460,740 outside.

In Kingston upon Thames, south-west London, parents pay more than £600,000 – double the cost of average local homes – for children to be eligible for a place at Tiffin School for boys and Tiffin Girls’ School.

Nitesh Patel, of Lloyds, said demand had led prices to rocket “out of reach for many buyers on average earnings”.

Article Source: http://www.express.co.uk/news/property/439603/House-prices-rising-200-a-day

Details of Foreign Buyers of Property in London

This article by Property Wire on October 24th, 2013 reveals the large number of foreign buyers in London especially in prime property market according to new research from Knight Frank.

There has been a lot of talk about the huge number of overseas buyers in London, especially in the new build prime property market, but a new detailed analysis shows that only a small proportion do not live in the UK.
 
Of all £1 million plus prime central London new build sales in the 12 months to June 2013, just 28% were to buyers not resident in the UK, according to an analysis report from Knight Frank.

While most analysis to date has concentrated on the nationality of purchasers, this research focuses on a buyer’s residence. In a city as diverse and globally connected as London, where, for example, 38% of inner London residents were classified as foreign born in the 2011 census, this is perhaps more accurate when assessing foreign demand, the firm said.

The research reveals that over the 12 months to June 2013 49% of all £1 million plus sales in prime central London went to foreign buyers by nationality and the 28% who were not resident in the UK were mostly investors looking to earn an income by letting their properties to Londoners.

To understand the scale of international purchases across Greater London Knight Frank’s research team assessed a sample of 3,500 property titles for new build property purchased in the 24 months to June 2013. This involved developments in all 33 Greater London boroughs, with sales prices ranging from £200,000 to £5 million.

Residence of ownership was based on the proprietor record in each title from the Land Registry. Where there were companies or trusts the researchers took a view that with the exception of registered social landlords, or other obviously UK based entities, these records represented international purchasers.

The research found that 51% of new build purchases in the relatively small prime central London market were to UK residents over the past two years. Across the remainder of inner London the portion rises to 80%. In outer London, that is the remaining 19 boroughs, more than 93% of sales were to UK residents.

Overall the most number of foreign buyers come from Europe, the Middle East and Russia, the research also shows.

‘Our estimate is that over the past two years 85% to 90% of all new build purchases in Greater London have been to UK residents,’ said Liam Bailey, global head of residential research.

‘When we considered the two year period covered by our sample of new build sales records there was no indication of a shift towards higher non resident purchases over that period. While some developers have noted rising interest from overseas buyers in areas outside central London, these appear to be localised examples,’ explained Bailey.

‘Our research points to the fact that the majority of demand for new build property in London from overseas remains focussed on the relatively small and concentrated market made up of the central London postcodes,’ he added.

Article Source: http://www.propertywire.com/news/europe/london-international-buyer-research-201310248384.html

London Property Market Goes from Strength to Strength

This article by David Shuker of Prudential on October 23th, 2013 shows figures that property market in London is riding in the crest of a wave at the moment.

The London property market is currently riding the crest of a wave, with prices having risen dramatically in some boroughs over the last few weeks.

In Kensington and Chelsea and Westminster, for instance, asking prices have climbed by 12% in just one month.

What's more, prices in these boroughs have jumped by as much as 30% over the past year.

Miles Shipside of Rightmove remarked: "Some agents currently report a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.

"Unsurprisingly, many of this month's best performers are boroughs in inner London."

Earlier this month, the EY Item Club, one of the country's leading economic forecasters, said that there is minimal risk of another bubble developing in the UK housing market.

The body speculated that government schemes would lead to a 3.5% boost in houses prices this year and 6.6% in 2014.

Article Source: http://www.pru.co.uk/guides_tools/articles/801652378-London-property-/

Property Gives UK Tax Take A Huge Boost

This article by The Economic Voice on October 22nd, 20113 tells us that Land tax receipts up 30% over the last quarter.

Residential property transactions are fuelling a higher increase in tax revenues for the government, said London Chartered Accountants Blick Rothenberg LLP.

Monthly figures released today by HMRC show that the government’s tax take is up for yet another month and that residential property transactions are showing the largest rate of increase.

Frank Nash, a senior partner with the firm, said: “Stamp Duty is consistently pulling in over £800m a month for the last quarter. This is a watershed figure because it has never gone above this since 2008. This is as a direct result of residential property transactions.”

He added: “There have been over 200,000 residential property transactions alone in the last two months and a million in the last 12 months. There have been half a million transactions since the Governments Help to Buy Scheme (HTB) was put in place in (April). The last quarter’s home transactions are the largest for the last 5 years.”

Frank Nash said that the increase in tax take was being fuelled by an increased demand for property which combined with low interest rates, and on the supply side government incentives through the HTB scheme and de-regulation was boosting the residential property arena.

Frank Nash said: “The Government is lending new buyers a 20 percent deposit. This could fuel growth, inflation and house prices. It needs to be tempered and perhaps be a long-term rather than a short-term scheme. New buyers should have the same opportunities over a longer time scale.”

Nash said that there was was further good news because this probably means that consumer spending will increase (on ancillary housing items), and therefore increase the VAT take.

He added: “This highlights the importance of the property market for the UK economy in terms of its overall health.”


Article Source: http://www.economicvoice.com/property-gives-uk-tax-take-a-huge-boost/

'Unsustainable' 10% Surge in London House Prices Smashes Previous High Amid 'Buying Frenzy'

This article by Matt West of This is Money.co.uk reveals a report that showed house prices in London are rising in some regions but at below the rate of inflation.

House prices in London are rising at 'unsustainable levels with the average asking up now £30,000 higher than their previous July peak, a report showed today.

Property website Rightmove said the onset of autumn saw national average asking prices rebound by 2.8 per cent in October - reversing September's 2.8 per cent decline - and rise 3.8 per cent on the same time last year. The average property was worth £252,418, up almost £7,000 in a month from £245,495 in September, the website said.

But in London, after the summer lull saw a slight drop in properties being listed for sale and slight price falls, new seller numbers surged 15 per cent while asking prices shot up 10.2 per cent in October.

Patchy: House prices are rising in some regions but at below the rate of inflation while in other regions they have fallen

The average asking price in the capital is now 5.6 per cent or £28,852 above July’s record of £515,379, equivalent to an average growth rate of 2 per cent a month over the past quarter.

And with affordability in London stretched to near breaking point, Rightmove said the second phase of the Government’s Help to Buy scheme was likely to have little impact on the lives of ordinary Londoners. 

Buyers in the capital were already facing income challenges that would restrict their borrowing capabilities rather than difficulties finding a deposit, the website said.

Average prices in outer London of £461,937 are more than double those in the rest of England and Wales at £226,861. But average wages are around 60 per cent higher in the capital, meaning Londoners are struggling to service ever increasing mortgage debt.

Elsewhere in the country, two regions  - Wales and the West Midlands - recorded a fall in average prices in October. House prices in five other regions - the North, North West, Wales, West Midlands and the South West - remained lower than a year ago.

Rebound: After falling for two consecutive months during the summer lull, house prices have begun to rise again 

Seven in ten regions saw house price rises that lagged behind inflation. Only London, the South East and East Midlands saw house prices rise by more than retail price inflation of 3.2 per cent . 

The South East remains the natural recipient of increased demand given the extreme supply shortages in London.

Asking prices rose 2.3 per cent in October although they remained 2.1 per cent behind the peak of £330,612 achieved in July this year.

Rightmove director Miles Shipside said: 'Fewer sellers coming to market in the capital during the traditional summer recess resulted in total price falls of 4.3 per cent over August and September. 

'However, this month’s rebound in the number of sellers brings the quarterly growth figure back into line with the recent trend at around 2 per cent a month. 

'Although not sustainable in the longer term, some agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare.

Capital trends: Some estate agents currently report there is a buying frenzy in parts of prime inner London, with available stock so low that their shelves are now bare

'Unsurprisingly, many of this month’s best performers are boroughs in inner London.'

He added London needed to see an increase in housing supply to meet heightened demand which would only come from more houses being built and more owners putting properties on the market. 

Rightmove said the situation in London was exacerbated by overseas investor demand swallowing up much of the new-build supply, adding to shortages and creating upwards price pressure.

Mr Shipside said: 'London is a world city where overseas investors see real estate as a safe asset, at a time when safe assets are increasingly scarce, and developers are building and marketing a lot of one and two-bedroom flats to meet that demand. 

'While they can achieve volume sales at premium prices, this eats up a much-needed source of fresh supply and drags up existing property prices at an even faster rate.'

The Rightmove house price report is the latest in a long line showing significantly higher activity in the housing market.

Last week, the Council of Mortgage Lenders said lending in the three months to the end of September rose at the fastest rate in five years.

Prices

Article Source: http://www.thisismoney.co.uk/money/mortgageshome/article-2465958/London-property-market-seeing-buying-frenzy-says-Rightmove.html