Cash rich buyers and lack of lending pushing Mr Average out of UK property market

Cash rich buyers seeking out bargain properties are likely to push down prices in the UK’s already hard hit locations, a new hard hitting report suggests.

The latest analysis of the property market published today (Monday February 21) from Rightmove paints a picture of a three tier market emerging.

It says that in the more economically depressed areas of the country forced sales are becoming more prevalent while in elite parts of London prices are rising. Then in the middle is Mr Average who can’t get a mortgage to buy.

Bargain hunting bottom feeder’ investors are expected to become more prominent in the second half of the year and will push prices down in the areas worst affected. And while there is evidence of growing competition to lend in this traditional first time buyer market segment, lenders are not looking to support the greater volume of deposit light first time buyers, it says.

Instead lenders are reportedly gearing up to chase the minority market of equity heavy buy to let investors but this means that mortgage funds are being denied to those who need them most. ‘Agents report that cherry picking lending practices are leading to some dysfunctional and desperate behaviour to solve housing needs,’ said Rightmove director Miles Shipside.

‘Some average sellers of yesteryear are now trading up by letting out their own home and renting the next rung up the ladder as they cannot get a suitable mortgage to sell up and buy a more spacious house. The accidental landlord is now being joined by the deliberate limbo landlord,’ he explained.

‘Meanwhile, professional investors are being funded by lenders to buy starter homes, condemning many of those who would have been first time buyers in the past to be permanent residents of the rented sector,’ he added.

The report also indicates that the number of new properties coming to market remains subdued as a substantial element of the mass market is locked in to their existing homes. Average unsold stock levels per agency branch have now declined for five consecutive months, falling from a peak of 78 properties to the current level of 69.

The main exception to muted new seller numbers is London, which is up 21% on the same period last year. ‘This is further evidence that the more elite and southern based markets have some immunity from the effects of stunted equity growth and problems accessing mortgage finance,’ added Shipside.

The remainder of the country has seen new listing numbers remain more stable, being marginally up by just 6% year on year on the same period last year.

Its report also shows that this month’s new sellers are mimicking last year’s February hike by increasing their asking prices by 3.1% to an average of £230,030, leaving year on year prices virtually the same, up 0.3%.

'Trends during the first six weeks of the New Year normally shed light on how the remainder of the year might pan out. The start of this year is very much a repeat of 2010 and so we expect 2011 to be characterised by what may well be the new norm, with the average buyer of yesteryear locked out of the market,’ said Shipside.

‘Any hopes that transaction volumes may be on the springboard preparing to return to historic norms will have been dashed by lenders’ predictions that 2011 lending volumes will match 2010’s dire levels. Mr Average will be left out in the cold in the buying and selling game unless the beneficiary of a hereditary hand out,’ he explained.

‘The current subdued market volumes are set to be the new norm unless the seemingly never ending discussions between Government and mortgage lenders find some way of increasing Mr Average’s access to lower deposit mortgages without pricing them out of the market,’ he added.

Demand and optimism in UK rental property market remains high

Demand for rented residential properties in the UK has hit a two year high but rents have fallen slightly for the second month in a row.
Four out of 10 landlords reported strengthening levels of tenant demand in the final quarter of 2010 and yields remain steady but voids fell, according to the latest Private Rented Sector Trends report from Paragon Group.
It also found that mortgage finance availability in the buy to let sector is improving but still scarce as the proportion of landlords reporting growing levels of tenant demand reached its highest level since the final quarter of 2008.
While the latest buy to let index from LSL Property Services shows that rents fell slightly in January compared with December but they are still 4% higher than a year ago and are showing signs of renewed growth in several areas of the country, according to the latest buy to let index.
Average rents fell to £682 per month as increasing investment pushed up supply, the index shows. It also found that tenant arrears also declines but remain high with 11% of all UK rent in arrears and total annual returns declined again as annual house price growth declines.
This is the second successive month rents have fallen. The average yield fell slightly to 4.9% in January, as rents declined at a faster pace than rental property values.
‘The recent loosening in the buy to let mortgage market has boosted the supply of rental homes on the market, a crucial factor in the temporary drop in rents. In the last quarter of 2010, the number of buy to let loans leapt by 7% according to Council of Mortgage Lenders,’ said David Newnes, estate agency managing director of LSL Property Services, owners of Your Move and Reeds Rains.
‘With more products coming onto the market, there are signs that this trend is continuing into 2011, allowing a growing number of professional landlords to get onto the market, or broaden their portfolios, and take advantage of near record rental income and strong tenant demand. International investors, too, have played their part, looking to place their cash in UK bricks and mortar while yields look attractive and properties are affordable,’ he added.

Despite the slight decrease in rents, they are still 4% higher than a year ago - and are showing signs of renewed growth in several areas of the country. Rents in the East and West Midlands increased by 0.9% and 0.8% respectively, 0.8% in Yorkshire and the Humber, and 0.2% in London. However, the overall drop was driven by larger falls in the East of England, down 2.5%, Wales down 2.1%, the North West down 1% and decreases of 0.4% in the South West and South East.
But with the Paragon report showing that four out of 10 landlords said tenant demand grew during the quarter, compared to 36% during the third quarter, the proportion of landlords reporting growing levels of tenant demand has now risen for six consecutive quarters, which has coincided with a shortage of mortgage finance in the owner-occupied mortgage sector.
Just 4% of landlords said tenant demand fell during the quarter, the lowest proportion since the third quarter of 2008 and the second lowest level since Paragon started collating the data in 2004.
‘Tenant demand shows no signs of slowing down and in some busy markets, such as London, there is anecdotal evidence of sealed bids being used for certain properties. This will become more commonplace across the UK unless the PRS is able to expand to meet higher levels of demand. Four out of 10 landlords say that tenant demand grew during the period, which is a significant number and has major implications for renting in the UK if the issue of rental property supply cannot be addressed,’ said Nigel Terrington, Paragon Group chief executive.
The also found that there has been an improvement in the availability of buy to let mortgage finance with 19% of landlords saying that mortgage finance was either widely or reasonably available, up from 17% during the third quarter. Conversely, the proportion of landlords stating that mortgage finance was very restricted dropped from 29% in the third quarter to 26% in the fourth.

South of the River London property developments proving popular with Middle East buyers

Parents who swapped London for the Home Counties a generation ago in order to raise their children are heading back to the capital city, according to property consultants Cluttons.
With their children having left home for good and prices in some areas of London at a more affordable level than they have been for several years, Cluttons has seen an upturn in middle-age-to-retiree homebuyers looking to return to the buzz of a London lifestyle.
 
It said that the capital has changed considerably over the past five years, becoming more of a cultural centre with new improved public transport links. Many retired or pre-retirement age homeowners are moving back, giving up large homes with time consuming gardens to move to lower maintenance properties.
 
The South Bank has been especially popular for this market, with its ever changing river views and proximity to the growing number of cultural attractions, in addition to Borough market, renowned for its fresh produce and eateries, it says.
 
‘Traditionally, this stage of the cycle involves downsizing to release equity and relocating to a more rural or coastal setting. However, we have seen a growth among so called empty nesters, who are postponing their retirement dates and seizing the chance to return to London to rediscover a lifestyle they had at the beginning of their career,’ said James Hyman, partner for residential sales at Cluttons.
 
‘Many are looking to trade in their large detached homes with substantial gardens for apartments with good internal amenities and security such as porterage and based in locations easily accessible to the cultural attractions London has to offer,’ he explained.
 
Cluttons also said there is a new trend with Middle Eastern and other foreign buyers looking for residential property south of the River in London. Traditionally they look for property in prime Central and West London but new developments are catching their eye in and around London Bridge and Tower Bridge.
 
‘The new Shard development is helping to put the South Bank on the map for many overseas buyers but especially those from the Middle East who have now discovered the area’s potential. As development land in North and West London becomes scarce, an increasing number of commercial developments are being built south of the river. This has in turn drawn attention to previously lower profile areas like Shad Thames and the South Bank in general which now offer greater opportunities for price growth,’ said Hyman.
 
‘Considerably improved transport links and access to the City and West End as well as the kudos of cultural icons such as the Tate Modern, Globe Theatre and South Bank arts arena are now proving popular with these buyers,’ he added.

Rental properties are being snapped up across the UK

UK private rental properties are being let within 15 days on average - 5 days quicker than a year ago, reports the letting agent and property services group Countrywide.

The latest findings from Countrywide's quarterly branch survey reveals that there are an average of 4.4 tenants vying for each property across the UK; with the South West generating the greatest demand with an average of 5.9 tenants.

In Q4 2010 the number of new tenants registering for rental accommodation increased by 14% compared to the same period in 2009. Overall, the total number of new tenants registering for rental accommodation exceeded 200,000 last year - a record high; with new tenant registrations increasing by 37%, which peaked between July and September 2010.

Agents throughout the UK reported a significant lack of property supply with the average number of properties available to let falling by 29%.

Leading high street names took part in the survey, such as Bairstow Eves, Mann Countrywide, Taylors, Bridgfords, Abbotts, Gascoigne Pees, Slater Hogg & Howison, Entwistle Green and Fulfords, which confirmed that two bedroom houses remained the most sought after property type in the final quarter of the year.

The findings of the survey also revealed that the proportion of three and four bedroom properties entering the rental market has steadily grown across the UK - increasing by 3% over the last quarter and 2% compared to Q4 2009.

John Hards, Co-Managing Director of Countrywide Residential Lettings said: "The rental market has seen record levels of demand in 2010. In the final quarter, whilst we experienced the traditional slowdown, the continuing demand is seeing many properties in prime locations having new tenants secured within hours of coming onto the market.

"We are seeing a change in the demographic of tenants with a growing number of professional tenants emerging across the country, as affordability issues facing homebuyers that are unable to sell or raise the capital to buy their next home. These wider economic issues are reflected in our rental stock, with a growing number of 3 and 4 bedroom family homes entering the market but the greatest demand is for 2 bedroom apartments and houses which are still in short supply."

Regional Highlights

* South West: Studio flats and one bedroom properties were in greatest demand, making up 25% of the properties let in the South West during Q4 2010.

* South East: Apartments made up 48% of all properties rented -up 1% on the previous quarter. In comparison, in Q3 2009 apartments made up 36% of all properties rented.

* North West: First time landlords made up 25% of new landlords entering the market - up 8% compared to Q3 2010.

* North: 52% of small scale buy-to-let landlords let out their properties in the final quarter of the year - up by 22% compared to Q3 2010.

* East Midlands: 32% of all new rental properties coming onto the market were three bedroom properties - an increase of 4% on the previous quarter and a 2% increase on the same period in 2009.

* West Midlands: Demand four bedroom properties is the highest in the UK with an average of 7 tenants trying to rent every four bedroom property.

* London: This region saw the sharpest increase in the proportion of couples under 35 looking for rental accommodation, which made up 28% of all new tenant applications in Q4 2010 - up 9% compared to Q3 2010.

* Scotland: Four bedroom properties were in high demand with an average of 4.4 tenants trying to rent each rental property - up from 2.5% in Q3 2010.

* Wales: The properties most in demand were apartments, with 57% of all properties let in Q4 2010 being apartments.

UK property sector influences strength of Pound

The Pound has been making back ground following the steep drop bought on by the surprise contraction in GDP figures on Tuesday. Yesterday’s Bank of England minutes indicated that policymaker Martin Weale joined Andrew Sentence in voting for a 0.25 percent interest rate rise which will have aided Sterling slightly.

However an interest rate rise was not ear marked until August in the MPC minutes, which will serve to dampen some of the recent hype for an earlier increase which has pushed Sterling upwards. It is also significant that these were the minutes from two weeks ago coming before the shockingly low GDP figures – so the impact of GDP has not yet been dissected by the Bank of England but will come in the next meeting and set of minutes in February.

Weakness in the property sector has reared its head once more with a Hometrack housing report for December indicating a drop in house prices by 0.5 percent in December – a drop for the seventh month in a row.

Boom time for prime London property rentals, new research shows

The prime London property rental market is now characterised by severe stock shortages and very high levels of demand, a combination that will underpin the strong price growth seen in 2010, according to consultants.

Average rents grew by 11.5% in 2010, according to latest analysis from Savills research department. As a result, rents are forecast to grow this year by an average of 8% across prime London and 7% in the prime central zones. This compares to a 1% growth forecast for capital values across the capital this year.

Growth in 2010 was supported by a general lack of properties available to rent at a time when increased demand for rental property, particularly from corporate tenants, was recovering, Savills latest report says.

All areas show growth with North London, including Hampstead and Islington, leading the way with exceptional growth of 17.6% last year. Demand is running at an all time high in these areas, suggesting that 2011 will be a second year of very strong growth in rental values.

While rental growth increased 5.1% in prime Central London, 10% in prime South West London, 10.8% in prime East of City and 17.6% in prime North London.

‘Stock shortages persist which is good news for landlords. The dynamic of constrained mortgage markets, of buyers adopting a wait and see approach, a lack of new build supply, a return of corporate tenants, improving employment prospects and the reduction in accidental landlords, means that strong rental growth will continue to characterise the market in 2011,’ said Jacqui Daly, director at Savills residential research.

The research also shows that the lower tiers of the prime London rental markets have seen the strongest growth in 2010 as caution amongst tenants and reduced corporate allowances have concentrated demand for smaller properties.

In prime South West London the particularly strong sales market in 2010 reduced the supply of rental properties available as accidental landlords returned properties to the sales market. Additionally, needs based family demand has persisted, pushing rental values up. Both houses and flats saw similar levels of rental growth reflecting the broad tenant base and variety of budgets in this market.

The Savills Market Strength Indicator is a useful indicator of future price drivers. For prime central London the indicator is now 11% above its long term, four year average, while stock levels are 17% below the average. In south west London the market strength indicator is at +79%, with stock levels down 40%, creating an acute demand supply imbalance, suggesting that values could rise ahead of the market average this year.

‘We expect to continue to see a growing number of UK tenants at all levels and from all age groups and walks of life. Renting is now considered a perfectly acceptable way of life in the UK, whether you simply can’t afford to get on the housing ladder, want to try an area before buying or need to rent out your own home whilst renting a bigger/smaller one or in a different area to be close to schools or loved ones,’ said Jane Ingram, head of lettings at Savills.

New property search service for London launched

Buying a home can be an arduous task. Purchasers not only need to consider where they buy or how much they pay, but also the proximity to work, quality of the local schools, transport links and amenities.

In London the choice can be vast, according to Harrods Estates, which has just launched its new Property Acquisition Service which takes the stress out of finding the perfect home in the UK’s capital city.

It started in the Home Counties in November 2010 and following great success, has now expanded its service to London. The discreet bespoke service helps clients throughout the home buying process from the initial search to contract exchange and completion.

After a free no-obligation consultation, the acquisition agent will begin an extensive search that matches the client’s requirements, complete tours of the area and view a wide range of homes. The Agent will then short list the most suitable properties and present them to the purchaser.

Richard and Rebecka Clarke used the acquisition service to find their new home. ‘We were both working full time and Rebecka had just had a baby when we decided to move home. We were living in a three bedroom apartment in High Street Kensington and wanted something more suitable for our growing family. We had a clear idea of what we wanted, all we had to do was tell the agent and she did all hard the work for us. The stress and hassle was completely removed,’ said Richard.

The acquisition agents have an extensive knowledge of the property market and know the best places to invest as well as the best home to buy. The service offers great value for money; we actually saved money as we bought our home before it even went on the market,’ he added.

Shirley Humphrey, sales and marketing director of Harrods Estates said that with the average Londoner working a 40 hour week or more, it can be really difficult to find the time to search for a new home. The Property Acquisition Service enables them to brief the agent on their requirements and sit back whilst they search for a perfect property.

All searches are supported by detailed property reports. These cover both general data on the area such as market reviews, local schools and other amenities, and information specific to the property, such as land and planning reviews, advice on investment potential, estimates for development and refurbishment, rental forecasts and estimated running costs. The service also negotiates offers on behalf of clients and oversees the buying process through to completion, working with solicitors and third parties.

‘We offer a discreet and bespoke service to our clients, designed to cater to their every requirement, such as being near stables so their children can ride regularly or close to an airport if they travel frequently,’ explained May Rahmani, property acquisitions area manager for Harrods Estates.

UK commercial property markets showing modest improvement, according to surveyors

There is cautious optimism for the commercial property market in the UK as the sector shows further modest improvement although there are regional differences in both the occupier and investment areas, according to a survey published today (Tuesday February 15).

Some 18% more surveyors expected new sales and lettings to increase in the next three months, the latest Commercial Property Market Survey from the Royal Institution of Chartered Surveyors covering the fourth quarter of 2010 shows. It was a rise from the third quarter of +8 and is the best reading since before the onset of the credit crunch in 2007.

Meanwhile, 8% more reported a rise than fall in occupier enquiries, compared with -22 previously, suggesting that some businesses may now be looking to expand, the report says.

It points out that significantly, in the last three months of 2010, overall tenant demand for commercial property stabilised with a net balance of zero from -6. However, while the picture clearly is improving, surveyors continue to cite uncertainty over the prospects for the economy as a drag on the market.

Just 4% more surveyors saw an increase rather than a decrease in available occupier space, down from a reading of +16 in the third quarter. In the office sector, available space registered a zero net balance, the lowest since the fourth quarter of 2007. However, available space continued to edge up in both the industrial and retail segments of the market, albeit at a lesser rate, +5 and +4 respectively. Regionally, London experienced a sharp fall in supply of office space, while industrial property in the South and South East saw declines for the first time in three years.

With occupier demand broadly stabilising but available supply still nudging upwards, it is not a surprise that the headline net balance for rental expectations remained in negative territory in the fourth quarter, the report says. However, the overall reading for the office sector was slightly positive and it was particularly so in London. The net balance for rental expectations in central London climbed to +50 while across the rest of the capital, it jumped to +34.

Meanwhile, rental expectations fell back at the fastest pace in the South, and continued to decline across regional office and retail markets. The outlook for industrial rents remains relatively stable, however, and even improved in London and the South East, in part to the stronger manufacturing sector.

On the investment side, the survey shows respondents in London seeing capital values rising with the net balance increasing for the sixth successive quarter. By way of contrast the readings for the rest of the South, Midlands and North remain negative.

‘While it is true that some optimism is returning to the real estate world, the commercial market still faces significant challenges. Regional variations are becoming increasingly visible with the picture on rents and capital values broadly reflecting the emerging economic recovery,’ said Simon Rubinsohn, RICS chief economist.

'Prime London offices are, and will continue to be, the most buoyant part of the market. Meanwhile, secondary offices around the country are a particular area of concern as oversupply will be compounded by likely consolidation in the public sector. On top of this, the general lack of new projects being initiated outside of the capital has important ramifications for regeneration in large parts of the country,’ he added.

Further house price falls expected as economy remains fragile

The fragile economic recovery looks set to disrupt the housing market during 2011 leading to property price falls, it was predicted today.

The Centre for Economics and Business Research (Cebr) said house prices had risen by 6.4% during 2010, but it said the market recovery would stall this year, triggering price falls of 1.7%.

It said anaemic growth in disposable incomes and higher unemployment throughout 2011 would trigger house price falls, particularly in regions that were most vulnerable to public sector cuts.

But it said affordability for first-time buyers would reach an eight-year high as house price growth weakened and mortgage interest rates stayed at record low levels.

Mortgage lending is expected to remain low next year as demand is muted and households focus on paying down their debt and increasing their savings levels.

But house prices should begin to rise again in 2012 as banks relax their lending criteria further and consumer confidence recovers.

The group expects property prices to rise by 2.3% in 2012, followed by gains of 3.7% in 2013 and increases of 4.7% and 5.5% in 2014 and 2015 respectively.

Douglas McWilliams, chief executive of Cebr, said: "We expect house prices to grow tentatively over the coming years, given that household incomes are being squeezed and banks are still wary of lending.

"There is currently significant uncertainty in the market caused by the Government's spending cuts and a choppy recovery, which has greatly impacted transaction levels."

Shehan Mohamed, the report's author and an economist at Cebr, said: "We expect to see household earning power suffer over the next year or so, due to higher inflation and weaker employment prospects as the economic recovery remains fragile.

"Lower consumer confidence throughout the year is expected to rein in demand for mortgages, which will average around 50,000 per month - still around 50% lower than pre-credit crunch levels.

Prime property market in England and Wales set for recovery in 2011

The prime residential property market in England and Wales will be steady in the first half of the year before showing an improvement in quarter three and then maintaining that momentum into 2012, it is claimed.

According to Mike Bidwell, chief operating officer of Fine & Country UK, who has worked in the residential market place for over a quarter of a century, the recovery will take place quicker in the south of England rather than the north even though there are hot spots and cold spots in both halves of the country.

He has held detailed conversations over the course of the last three months with some of the best and most experienced residential estate agents in England and Wales who form part of the Fine & Country network comprising of 300 locations worldwide.

‘I expect the mainstream market will remain challenging throughout next year followed by a gradual improvement during 2012. There is a pent up demand across the market with sales volumes having dropped dramatically over each of the last three years. It could be estimated that there are as many as 2,000,000 people who have not moved during this period that otherwise might have done so were it not for the adverse economic conditions,’ said Bidwell.

I believe that some homeowners have placed their moving plans on hold for long enough or are seeing enough light at the end of the tunnel to make their minds up and get on with it. After all even if prices are down in their area from the peak, then so long as they buy and sell in the same market conditions, it really makes no great difference particularly as more and more owners are seeing their house as a home as opposed to an investment,’ he explained.

He points out that the top end of the market will recover more quickly as owners in this sector are usually more equity rich. ‘We already know that there is enough cash around to ensure that the buying chain doesn’t have to start with a first time buyer, for whom it has to be said, the outlook unfortunately remains quite tough with attractive mortgage deals remaining hard to obtain,’ he said.

He also expects interest rates to remain low for an extended further period making property more affordable to those who can fund the deposit required to get into the market. ‘I also believe that there is reason to believe that responsible mortgage lending will increase once the economy shows signs of consistent recovery, which will inevitably come later for the lower end of the market,’ he added.

Retirement Villages Ltd secures top five placings in UK’s ‘best retirement community’ listings

In its 30th anniversary year, the UK pioneer of age exclusive communities Retirement Villages Ltd has secured the top five rankings in a list of Best Retirement Communities awarded by an independent website.

The website bestretirementdestinations.com has named Retirement Villages Ltd’s Cedars Village in Hertfordshire the UK’s Best Retirement Community for the second year running. The next four places are taken by other sites in the company’s portfolio; Roseland Parc in Cornwall, Castle Village also in Hertfordshire, Thamesfield in Oxfordshire and Elmbridge in Surrey. The company claims another top 10 place with Lime Tree Village in Warwickshire at number seven.
 This is the second consecutive year the company has scored such impressive success – last year it held almost identical rankings.

Each community is reviewed against a strict list of criteria which includes residential options, visual appeal, recreational activities, social networking, and safety and security. The overall experience for residents is also taken into account by the website – an independent authority on ‘where you should retire’.

Bestretirementdestinations.com considers the communities which rank in its top 10 as ‘industry leaders and proudly highlights them as the best’.
 The company’s Sales and Marketing Director Sarah Burgess said: “We are delighted to have scored so highly in the rankings. To have all five top places is testament to our commitment to provide the very best in retirement living for our residents.

“As the population ages, the living options in retirement are expanding and the market is getting more competitive. To have not only secured but retained our position in the current climate is something we are very proud of – both for ourselves, and for our residents who make the villages what they are.”

Retirement Villages Ltd has been providing bespoke lifestyle and care villages for the over 55s since 1981. As the pioneers of the UK model, the company now has nearing 2,000 residents living in 12 locations spread across 10 counties in the south of the country.  Already this year, the company has relaunched a village in Lincolnshire, opened a new dementia unit, has a new nursing home opening in April and is carrying out major refurbishment work at its newest acquisition in Bath.

Central London property rents set for 3% rise, report suggests

Residential rents in central London will grow by 3% this year, slightly ahead of the expected increase in average incomes, according to the latest forecasts from property consultants Cluttons.

‘This year's growth will have a positive impact on yields during a year when capital value growth will be at 2.5%, although rental growth has decreased since last year when we saw a phenomenal, albeit unsustainable, increase of almost 20%, said Andrew Stanford, Head of Residential consultancy division at Cluttons.

‘The continued performance of the residential market has not escaped investors’ attention, particularly in the face of growing inflation concerns. Overseas investors remain a strong driving force for the market, with Central London offering a genuine asset in a secure market and providing diversification outside a domestic economy. With China’s decision to raise interest rates, the UK may offer even greater value for Chinese investors over the coming months,’ he explained.

Overall Cluttons reports a mixed picture in the lettings market. ‘While existing and potential tenants are proving increasingly cautious with their budgets, demand remains positive in most markets. The West End residential villages have seen particularly strong growth in demand and the market balance remains in favour of landlords,’ said Stanford.

We have seen the return of relocation agents to the market, with a growing number of job starters in the banking sector relocating to the UK from the USA, Russia and the Middle East. Relocating tenants are armed with lower budgets than at the peak of the market in 2007,’ he explained.

‘As a result, potential tenants are often flexible in the areas in which they are searching for accommodation. Pimlico, for example, is attracting increasing interest due to relative value,’ he added.

However, given evident concerns for household finances underlined by a small but notable increase in rent arrears in Central London, landlords are generally proving responsive to the market, he believes.

‘Tenants are increasingly seeking to avoid the open market, given their experience of the strength of activity during the latter months of 2010 and are agreeable to small increases in rents at renewal. However, there is considerable resistance amongst tenants for increases in excess of 5% in most locations,’ concluded Stanford.

Advice for UK property landlords on energy efficiency issued

Landlords with residential properties in the UK should consider measures to improve the energy efficiency of their properties, according to the Association of Residential Letting Agents (ARLA).

The Government's Green Deal will encourage landlords to take advantage of up front financing to make their properties more energy efficient, where tenants request improvements be made.

For those landlords who don’t comply however, the Government has stated that it may introduce regulations to force landlords to improve their properties by 2015.

The Government’s aim is for all properties with an Energy Performance Certificate (EPC) rating of F or G to be improved beyond that grading, which may be a significant challenge for older properties.

So ARLA has issued a set of simple tips for landlords to make their properties more efficient, thus saving money and further financial outlays in the future.

These include installing cavity wall and floor insulation and although this can often be a disruptive process, ARLA points out that effective insulation will represent a significant step towards improving the energy efficiency of a property.

It also advises ensuring that there is effective loft insulation. ‘Although many properties now have loft insulation installed, check the depth and quality. The recommended thickness is between 250 to 300 mm for optimum energy efficiency,’ ARLA says.

ARLA recommends that lagging should be installed around water pipes and boilers to minimise heat loss. ‘As many will have experienced this winter, water pipes are also prone to freezing, so insulation should help to prevent this,’ it adds.

Then landlords should seek to block draughts in various parts of their properties, through draught proofing doors and windows, as well as reducing heat loss through floorboards and install a thermostat on boilers to ensure that when a room reaches its optimum temperature of around 19°C, the heating is automatically switched off, thus reducing heating bills.

Finally it says that effective communication between landlords and tenants can ensure that tenants are aware of the importance of energy efficiency, and take their own simple steps to reducing heating costs.

‘Landlords can already take advantage of a tax allowance of up to £1,500 for these energy efficiency improvements through the Landlord’s Energy Saving Allowance (LESA). It makes sense therefore for landlords to carry out these improvements straight away, as considerable cost savings can be made,’ said Ian Potter, operations manager of ARLA.

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UK could see rush of properties for sale if huge capital gains tax rise goes ahead, experts warn

Capital gains tax will rise under the new Conservative and Liberal Democrat government in the UK with property investors likely to suffer as a result. It is widely expected that CGT will rise from its current 18% to 40 or 50% which means that buy to let landlords are likely to end up paying at a rate similar to their income tax level.
 
Everyone has an annual CGT free allowance of £10,100 per year, beyond this gains on second homes, shares and other investments see the tax charged at 18%. Due to the nature of not being able to sell chunks of properties over a period of time in order to minimise CGT, property investors are hit hard by the tax.
 
Depending on whether changes are brought in immediately, which is unlikely, or from April 2011, a rise in CGT could prompt a rush of buy to let investors selling up to avoid seeing their tax bill double.

The National Landlords Association is calling for buy to let investors to be considered as businesses or entrepreneurs and therefore be exempted from higher CGT. ‘We are concerned that a tax increase of this nature will act as a barrier to further investment in residential property just at a time when there is an urgent need for more housing,’ said NLA chairman David Salusbury.
 
‘The NLA will be doing everything we can to ensure that landlords’ activity is considered to be business activity for the purposes of CGT. There should be further consultation with the industry before drastic changes are made. The law of unintended consequences should be considered here,’ he added.
 
A higher tax on investment property could prompt a flood of homes coming onto the market. ‘Many second home owners and investors will see this as an opportunity to come out of the market for the short term. Even if they were to hold onto the properties for any increase in value over the next three or four years, this increase is unlikely to surpass the rise in what they have to repay to the Treasury,’ said James Hyman, of Cluttons, the surveyors.
 
‘In advance of these changes being formalised we are likely to see people scramble to take gains, prompting a rush of sales of second homes and share portfolios,’ said Ronnie Ludwig, partner at chartered accountants Saffery Champness.
 
Stuart Law of property investment firm Assetz believes it will have a negative impact on property investment in the UK.
 
‘Some local markets could be oversupplied in the second half of 2010 and early 2011, and residential property investments could become less tradable in the longer term,’ explained Lucian Cook, residential research director at Savills.

London house builder celebrates 2010 success

Staff at Barratt London are celebrating after enjoying remarkable sales success in the year just gone, showing that demand for new properties in the area remains strong despite the mixed national real estate picture.

The London based house builder secured reservations worth £139 million in the final six months of the year just ended, hitting its own internal targets. The outcome provides solid evidence that demand in the local housing market remains strong.

‘We are proud of our reputation for building high quality homes in great locations throughout the capital. This has enabled us to perform strongly despite the uncertainty about the wider economy at the moment,’ said Gary Patrick, sales director of Barratt London.

'It is clear that plenty of customers think now is a great time to take their next step on the property ladder. Prices are lower than they were in 2007 and interest rates are low too, which means rock bottom mortgage repayments,’ he explained.

‘What gives us the edge over other people selling homes is that we can provide customers with innovative financial incentives which enable them to get a mortgage, the key issue for anyone buying today.

‘It’s a great result for the last six months and speaks volumes about the talent and commitment of our team here in London. We’re hoping for continued success and many more satisfied customers in 2011,’ he added.

Homes currently available from Barratt include The Park House in Acton, which offers one and two bedroom apartments in a five storey building overlooking Springfield Gardens.

Due for completion in May/June 2011, prices start from £252,000 for a one bedroom apartment and from £328,000 for a two bedroom apartment. One bedroom apartments measure up to 518 square feet and two bedrooms range from 653 square feet up to 777 square feet.

Combining classic and contemporary architecture, the brick façade of The Park House is offset by striking glass and steel balconies. The modern interiors of the apartments include open-plan living areas and fully-fitted kitchens, complete with integrated appliances. Larger properties have en-suite shower rooms, as well as a family bathroom.

All apartments have a balcony, many of which overlook the park and landscaped gardens.  The private residents' only roof terrace above the fifth floor overlooks Springfield Gardens.

Home to more stations than any other area of London, transport links in Acton are excellent.  Both Acton Central (London Overground) and Acton Main Line (National Rail) are both about 10 minutes from The Park House.

From Acton Central, which has been modernised as part of the £326m project to upgrade the London Overground network, there are regular services westbound to Richmond and eastbound towards Stratford.  From Acton Main Line, trains take a little as seven minutes to London Paddington and, with plans for Crossrail trains to stop at the station, transport connections will be further improved.

The development is also within walking distance of a number of London Underground stations, the nearest being West Acton, from which Central line trains take under 25 minutes into central London.

Surge in Asian investors buying new build properties in central London, report indicates

Asian Investors are now buying more than a fifth of all central London new build properties, and account for almost half of all investment purchases in central London, a new report shows.
 
The revival of international investment demand for new build property has been one of the most remarkable features of the residential property market over the past 18 months, according to Liam Bailey, head of residential research at Knight Frank.

While the market has returned to life, after it pretty much shutdown in 2008, current international investment demand is almost totally concentrated on London and is primarily coming from Asia, the report shows.

Of the 7,595 new build properties completed in the 12 months to March 2010, 41% of these were bought by investors rather than owner occupiers. Some 49% were bought by Asians of which 11% were from China or Hong Kong, 10% from Singapore and 7% from Malaysia. Some 36% of new build properties were purchased by UK investors.

Knight Frank estimates that over the last 12 months the total volume of Asian investment has totalled £761million and the weaker pound has created a compelling buying opportunity for Asian investors.

Bailey explained that overseas purchasers buy property in the UK for a number of reasons but in almost all cases they are looking for a secure return on their investment. ‘The interaction of currency movements, strong capital price growth and, more recently, rising rents, have created an attractive investment case for many investors considering central London property,’ he said.

‘Despite prices rising by 22% in the 14 months up to the end of May 2010, effective prices in central London were still 32% lower compared to their peak March 2008 level for a purchaser looking to buy in Hong Kong dollars as a result of currency movements. Asian buyers have also benefited from the wealth created from strong Asian price growth. Similar savings have been delivered to Singapore, Malaysian and European buyers,’ he added.

Also rents in London have been rising since June last year and high demand has meant lower void periods for buy to let buyers and the London rental market is regarded as secure.

‘As Asian domestic markets show their own signs of difficulties, Chinese buyers in particular are keen to spread their exposure and invest in markets they regard as more secure than their own if they can get through the regulatory minefield and release the funds. In mainland China, local investors have become more nervous about keeping money in their own country after outstanding credit rose by 30% and at least seven Chinese cities saw their new home prices surge more than 50% over the 12 months to March 2010. The Chinese have built a reputation as strong savers and investors, the relentless rise in domestic property prices since house ownership was legalised in 1998 has encouraged a strong belief in bricks and mortar investments,’ explained Bailey.

Asian investors are also buying properties for their children studying in London. ‘We cannot underestimate the role of UK education in encouraging inward investment into London. Over the past decade the number of Asian students studying in UK universities has risen by 175%. The strongest growth comes from Chinese, Indian and Pakistani nationals. In many cases Asian investors look to buy to cover the period of their child’s university duration and then retain as an investment,’ he added.

A good location, close to a tube station, is vital for Asian buyers, according to Sebastian Warner of Knight Frank’s residential investment team.  They also like to purchase near well known landmarks such as St Paul’s Cathedral, The City or the River Thames.

‘Asian investors are shrewd, and much more sophisticated in their research than they were just five years ago. They want detailed insight on the market and locality of the property. New build developments prove attractive as they offer high quality security, facilities such as gyms and restaurants, services such as concierges and secure car parking,’ he explained

Surge in cash buyers in London’s West End

Individuals are more confident about investing their money in property in London’s West End than leaving it in the bank, it has been suggested.

Over the last quarter of 2010, West End specialist estate agency, LDG, noticed a 20% rise in cash buyers compared to the same period in 2009. It says some 88% of LDG's buyers paid cash for their properties.

‘Low interest rates could be an explanation for this sudden increase in cash buyers, as money in the bank is not earning a good return, so people are keen to invest in something they believe to be more lucrative,’ said Laurence Glynne, partner at LDG.

‘People can see the stability and growth in the West End property market and feel it is a safe place in which to invest. It has benefitted from a number of regeneration schemes over the last few years and more are in the pipeline, which has boosted property prices. Also, the planned Crossrail project will improve the commuter links in and out of the West End, making the area more appealing and driving prices up further,’ he added.

According to Simon Taylor, commercial property consultant at LDG, the office market in the West End is also buoyant at the moment. ‘The increased interest in commercial property in the area has resulted in some new mixed use schemes being announced, as developers try to capitalise on the demand,’ he said.

'Planning permission for new commercial schemes in the West End stipulates that residential homes must also be provided. These newly built residential properties are driving up prices in the area as they appeal to foreign investors who are willing to buy lock up and leave properties off plan,’ he added.

In the final three months of last year, 28% of LDG's buyers were foreign and it is particularly interesting that none of these buyers purchased with a mortgage, all 28% paid cash. This shows the confidence that international buyers and investors have in the West End property market, the company says.

‘Historically, the London property market always outperforms the rest of the UK and the West End in particular appears to be resilient to the downward trend that has affected much of the country. For overseas buyers, the UK is seen as a stable country, both politically and economically, so they see property as a safe investment, particularly in prime London locations,’ explained Glynne.

For the first quarter of 2011, LDG predict that the market will remain stable. ‘We have not yet experienced any surge in buyers ahead of the stamp duty increase on properties over £1 million, which is planned for April. There are good levels of potential buyers currently looking for property in the area, but the demand outstrips supply as there is a lack of new properties coming onto the market,’ he added.

Slight rise in UK property prices in January

Residential property prices in the UK increased slightly by 0.8% in January but the general trend is downwards, according to the latest index from the Halifax published today (Friday February 04).

rices in the three months to January were 0.7% lower than in the preceding three months and this continues the slight decline on this measure since last spring. The pace at which prices are falling, however, remains markedly lower than during the second half of 2008 when quarterly declines of 5 to 6% were recorded, the Halifax adds.

On an annual basis, prices in January were 2.4% lower as measured by the average for the latest three months against the same period a year earlier and there are fewer properties coming onto the market for sale.

The latest Royal Institution of Chartered Surveyors survey, for example, reported a decline in new seller instructions for the third successive month in December. A continuation of this trend would help to reduce the imbalance between demand and supply and support house prices, the report points out.

The report also shows that there was a slight rise in housing market activity in 2010. The number of home sales in the UK increased by 4% from 846,000 in 2009 to 884,000 in 2010, according to the latest HMRC figures. Despite this modest improvement, sales remain very low historically and are just over half the annual levels of 1.6 to 1.7 million in 2006 and 2007.

‘We expect limited movement in house prices overall this year. There are, however, likely to be some monthly fluctuations with the risks on the downside. The prospects for the market in 2011 are closely aligned with the performance of the wider economy. Consumer confidence has fallen recently, partly as a result of nervousness about the economic outlook,’ said Halifax housing economist Martin Ellis.
 
‘On a positive note, there have been further signs that the recent downward trend in prices is causing homeowners to be more reluctant to put their properties on the market. This development should help to relieve downward pressures on prices as long as it is sustained. We also expect interest rates to remain very low for some time, supporting a favourable affordability position for many existing mortgage borrowers and those entering the market,’ he added.

But Mark Blackwell, managing director of property data conduit xit2, pointed out that indices are present are unreliable because the market is sp small. ‘There were less than 40,000 transactions in January and that means none of the usual indexes are as reliable as they should be. They’re just too volatile to draw meaningful conclusions from monthly statistics,’ he explained.

‘Having said that, it’s clear the housing market is bumbling along at the moment and it looks as if prices aren’t going to rise any time soon. Prices are threatened from a potential hike in the Bank Rate this spring. Not only would that punish existing owner, it would also land a savage psychological blow on potential buyers,’ he added.

Courtesy : Propertywire

Global office real estate markets at strongest for two years

Global office property markets are at their strongest for two years with 2011 expected to see the best real estate trading and performance since 2007, according to a new report.

Barring further financial shocks, analysts at Jones Lang LaSalle are expecting investment volumes to rise by a further 20 to 25% in 2011, which follows 50% growth in 2010.

In its latest Global Market Perspectives report it says that corporate occupiers are again flexing their muscles and improvements in the leasing markets are helping to build investor confidence.

‘Corporate cash balances and earnings are strong and major companies are poised to start spending again, just at the time when new supply in both North America and Europe is at a cyclical low,’ it says.

‘We believe the balance of risks in 2011 will be mainly to the upside as global business optimism grows; a sentiment very much in evidence from political and business leaders at last week's annual meeting of the World Economic Forum in Davos,’ it adds.

It points out that a recovery is well underway in most major real estate markets across the globe. Leasing volumes are at their highest level for two years, vacancy rates are beginning to stabilise or fall across the board, and rental growth is now a feature of many prime markets.

‘Improving market fundamentals are further boosting investor activity, leading to double digit capital value growth on prime assets in many top tier markets. The momentum for increased investment trades is building, encouraging investors to assume greater risk to achieve their intended returns,’ the report continues.

‘This competition will introduce more liquidity into the sector as the credit markets loosen and the lending environment improves as banks successfully refinance their loans. Positive business sentiment and stronger corporate balance sheets are boosting leasing market activity,’ it adds.

The report shows that net office absorption has more than doubled in Asia Pacific’s Tier I markets over the past year; leasing volumes in Europe are at their highest level since 2007; and, in the US, positive absorption has once again returned.

Across Asia Pacific, MNCs are becoming more visible and are driving large requirements in markets such as Greater China, Singapore and India. The Asian domestic corporate sector is also coming to the fore and competing for Grade A space, particularly in India and China.

It points out that the recent fourth quarter 2010 Hudson Report, a quarterly survey of employer hiring intentions, indicates that relatively strong jobs growth should continue in the region. Consistent with this trend, regional net absorption is expected to increase further in 2011.

In Europe, overall take-up for 2010 reached 10.6 million square metres, an increase of a third on 2009 and 5% ahead of the 10 year average, a level few expected at the start of the year. Expansion demand is an increasing feature of Germany, the Nordics and Central and Eastern Europe, but elsewhere corporate occupiers remain cautious with lease events and consolidation being the key drivers.

‘Although business sentiment in Europe is at its highest level since 2007, fiscal tightening threatens to undermine confidence and could moderate demand. Office take up across Europe is forecast to stabilise at around 10 million square metres in 2011,’ it adds.

The overall office market in the US is still in the process of bottoming out. Corporate demand continues to gradually return, with three consecutive quarters of net absorption gains. New York and Washington DC are the leading markets; however the nascent recovery is now broadening.  Across the majority of office markets in Latin America, strong economic growth is translating into healthy office demand. In Brazil’s major office markets, tenant demand is outstripping new supply, resulting in robust rental growth in São Paulo and Rio de Janeiro.

It also points out that new office supply is trending down, which will help to reduce vacancy rates in 2011. Office construction has virtually dried up in North America and office completions in Europe this year will be at their lowest level since 1998. In contrast, most of Asia Pacific is approaching the peak of its development cycle in 2011, with developers emboldened by a strong regional economy and improving occupancy levels for quality office space, though supply should start to moderate in 2012.

Poor property lending figures set to impact on UK property market

Mortgage approvals for properties in the UK fell more than expected in December to their lowest since March 2009 when the country was in the middle of a recession and could drag down the real estate market, according to experts.

The Bank of England said mortgage approvals totalled 42,563 in December, down from 47,287 in November and are now running at less than half their long run average, suggesting that further house price falls may be to come.

In December, net lending shrunk by £298 million as homeowners repaid more than they borrowed, only the third time this has happened since records began in 1993. The Council of Mortgage Lenders has predicted that net lending will drop even further to £6 billion this year.

‘Even allowing for the fact that the severe weather likely hit mortgage activity in December, the Bank data point to a housing market stuck in the doldrums. We maintain that house prices will fall by around 10% from their peak 2010 levels by the end of 2011,’ said Howard Archer, chief UK economist at IHS Global Insight.

Nida Ali, economist at Ernst & Young also believes the low levels of lending will impact adversely on the property market. ‘The level of depressed demand reflected by low mortgage approvals implies that house prices will continue declining well into 2011,’ said Ali.

Confidence in the housing market is being hurt by a still fragile economic recovery, reflected in an unexpected decline in gross domestic product in the fourth quarter of last year, and by the prospect of heavy public spending cuts as the government seeks to slash a record budget deficit.

Simon Rubinsohn, chief economist at the Royal Institution of Chartered Surveyors said the poor figures are a reminder of the challenges currently facing the housing market. ‘It is easy to blame poor weather, which clearly had some impact on the market. But on the other hand, the generally disappointing activity data through the latter part of 2010 is broadly consistent with the RICS Housing Market Survey’s negative picture on the number of buyer enquiries,’ he said.

‘Looking forward, some rebound in the January numbers is likely if only because of the better weather conditions. However, with lending still constrained, and mortgage rates edging up under pressure from developments in financial markets, it is hard to see mortgage approvals picking up markedly. Indeed, for the whole of 2011 we see activity in the housing market at a broadly similar level to that recorded last year,’ he added.

Courtesy : propertywire

Rise on demand for one bed rental properties in London

Rising rents are forcing many London tenants to search for smaller properties, creating fierce competition for one bedroom flats, it is claimed.

Where traditionally the majority of city workers have opted for a two bedroom property, giving them a spare bedroom or a study, property consultants Cluttons has seen a sharp rise in demand for one bedroom apartments as tenants try to keep rental costs down.

The usual cycle of workers upsizing to a larger property after a year or so has stalled, as many are deterred from moving by rising rental prices and a desire to keep their outgoings low, as concerns over job stability continue.
   This shortage of one bedroom properties has been exacerbated by the continuing difficulty in obtaining mortgage finance, which is preventing many tenants from purchasing their first home.

‘The combination of a difficult mortgage market, rising rents and general economic uncertainty has put significant pressure on the lower end of the prime London lettings market,’ said Lynn Hilton, partner for residential lettings at Cluttons.

‘Previously one bedroom properties were often seen as pied-à-terres or short term homes, but the market has shifted so that single professionals and couples, who would have previously chosen a two bed, now see the spare room as an unnecessary luxury,’ she explained.

'Young professionals arriving in London to take up positions in the City have noticeably lower budgets. They used to take two bedroom apartments at £550 per week, but now one bedroom properties costing in the region of £350 to £400 per week are in much greater demand,’ she added.

Meanwhile, the latest data from Land Registry’s flagship House Price Index shows property increased by 1.5% year on year in December which takes the average property value in England and Wales to £163,814. The monthly change from November to December was a price fall of 0.2%.

Five regions in England and Wales experienced increases in their average property values over the last 12 months. The region with the highest annual price change is London with an increase of 6.2%. London also experienced the greatest monthly rise with an increase of 1%.

The region with the greatest annual price fall is the North East, down 3.3%. The South West region experienced the most significant monthly price fall, down 1.2%.

The most up-to-date figures available show that during October 2010, the number of completed house sales in England and Wales dropped by 15% to 55,964 from 65,736 in October 2009.

The number of properties sold in England and Wales for over £1 million increased by 1% between October 2009 and October 2010, from 572 to 579.