House prices in ‘softest patch for several years’

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Value of average home ‘relatively static for ten months’, says Office for National Statistics

Following the release of the latest national house price index, published by the Office for National Statistics (ONS) alongside broader inflation figures this morning, Samuel Tombs, chief UK economist at Pantheon Macroeconomics, told the BBC: “It is now abundantly clear that the housing market is in its softest patch for several years.”

According to today’s report, property values were down between February and March in all regions of the UK except Wales and the West Midlands.

On an annual basis, averages rose 4.1 per cent to £215,848, well down on recent rates of more than five per cent, while the ONS said the average valuation has remained “relatively static for ten months”.

As a prime example of the broader slowdown in growth, the annual house price growth rate in London was 1.5 per cent in March, compared to 15 per cent in March 2017 and more than 28 per cent in April 2000.

Tombs added: “Looking ahead, it is very hard to see growth in central London prices recovering, given that valuations look stretched, the financial sector is facing an uncertain post-Brexit future and volatility in sterling is undermining property’s safe-haven appeal for overseas investors.”

 

read the full article on  The Week

UK house prices fall again, growing at the slowest rate in four years

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British house prices fell for a second month in a row in April, suggesting households are feeling the pinch from rising inflation since last year’s Brexit vote and low wage growth.

Nationwide said house prices declined by 0.4pc in April following a fall of 0.3pc in March, which had been the first fall since mid-2015.

In annual terms, prices were 2.6pc higher, the weakest increase in almost four years.

“While monthly figures can be volatile, the recent softening in price growth may be a further indication that households are starting to react to the emerging squeeze on real incomes or to affordability pressures in key parts of the country,” Nationwide economist Robert Gardner said.

Economists polled by Reuters had expected house prices to rise by 0.1pc in April from March and by 3.3pc in annual terms.

It came as Government figures showed stamp duty revenues are up 16pc in the first quarter of this year compared to the same period in 2016, which was boosted artificially by the surge in purchases to avoid the 3pc hike for buy-to-let properties.

 

read the full article on Financial Times

Investor demand for UK property rises across all sectors

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The UK commercial property market is strengthening, with industrial space outperforming office and retail, according to the Royal Institute of Chartered Surveyors’ (RICS) UK Commercial Property Market Survey.

As investor demand increased for UK commercial property across all sectors, with 18% more respondents reporting a pick-up in enquiries, industrial assets were most sought after in the first quarter.

RICS said 28% more respondents saw an increase in demand for industrial space across the UK in the time period.

Simon Rubinsohn, RICS chief economist, said: “The results of the latest commercial property survey chime with much of the recent generally more positive economic news flow.

 “The forward-looking indicators are also proving relatively resilient, although it would not be a surprise if activity slows somewhat ahead of the forthcoming general election.”
read the full article on IPE Real Estate

Real Estate Investment Trusts: An Overview Of Three Property Players

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Real Estate Investment Trusts (REITs) are comparable to mutual funds, which allow multiple investors to gain ownership of real estate ventures or operate commercial properties. They can be thought of as shares and most can be traded on major stock exchanges. REITs usually pay out all their taxable income in the form of dividends, and so pass on the tax to investors as shareholders then have to pay income taxes on the dividends they receive.

There are two main types of these trusts: equity REITs and mortgage REITs. Equity REITs generate income through rent and the sales of long-term properties, while mortgage REITs invest in residential and commercial mortgages. In the UK, REITs have various criteria which must be met in order for them to continue operating. These include having to distribute at least 90% of their taxable income in the form of dividends in each accounting year, to invest at least 75% of their entire assets in real estate, and to derive at least 75% of their gross income from rental payments, interests on mortgages or sales of real estate.

The main reason that investors are attracted to REITs is that it allows them to invest in real estate without having the massive capital required to purchase tangible real estate. REITs also provide investors with investments that are much more liquid than tangible real estate. They also offer an easy way for investors to diversify their portfolios, and high-dividend yields too.

However REITs also have a number of disadvantages: their performance obviously depends on the performance of the housing market, and rising interest rates can have a negative effect on their level of profitability. What follows is an analysis of REITs which have performed particularly well in recent times:

Great Ajax Group

Great Ajax Group (AJX) is a REIT that acquires, invests, and manages a portfolio of mortgage loans secured by single-family residences and single-family properties. Incorporated at the beginning of 2014, the Great Ajax Group is a very new corporation – but one whose fundamentals are nothing short of astonishing for a firm of its age.

The firm boasts a current ratio (current assets/current liabilities) of 13.50 and recorded earnings-per-share growth of 409.30% this year. Its price-to-earnings ratio of 7.68% is also very desirable – as is its small market cap of $247.94m, which may indicate that large investors and/or managed funds have thus far overlooked this particular REIT.

In addition to the already impressive fundamentals outlined above, the firm also has an annual dividend yield of 7.53% and very healthy net profit margin of 44%. As shown by the price chart below, Great Ajax Group’s share price has shown relatively low volatility since May 2016 and has been trading within a fairly uniform range.

However there are some considerations which investors should take into account before investing in Ajax. Over the time period discussed earlier, while volatility was low the firm’s share price nevertheless fell by about 5.7%. This is by no means a catastrophic reduction, but the share price continues on a slight downward trend.

There was an area of support (which has been outlined on the price chart below with a white shaded rectangle) that has been tested several times and not been breached – which indicates that it is a strong area of support. If this support area was to be breached then investor confidence may fall, and there may be an acceleration in the fall of Ajax’s share price.

In addition to this, the firm has a debt-to-equity ratio of 1.54 which indicates that it may not be able to generate enough cash to cover its debt obligations. This may be a major concern to investors as REITs are very susceptible to downturns in the housing market.

 

SOURCE: The Market Mogul

South-east Asia property prices are now at one of the most affordable levels on record, JLL Singapore

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It’s time for the Government to consider “thawing” property cooling measures, according to consultancy JLL.

The firm said in a report that one reason to reconsider the measures is the significant fall in property prices.

Overall prices of private homes have fallen by about 11.2 per cent since the third quarter of 2013, it said, citing Urban Redevelopment Authority data.

JLL said the luxury market has been most affected, with values declining by about 18 per cent from 2013, while those of mass market homes are down by 11 per cent.

Transaction volumes have also fallen. While last year recorded a three-year high in sales of 16,378 private homes, this still pales in comparison with the 22,197 homes sold in 2012, according to URA data.

“Property prices are now at one of the most affordable levels on record,” said Dr Chua Yang Liang, JLL’s head of research for South-east Asia, in a statement yesterday.

He said the price falls show that cooling measures such as the additional buyer’s stamp duty (ABSD) and the total debt servicing ratio have worked. “Now could be the right time to consider measures that allow the residential market to resume a course for moderate growth and thus avoid a sharper correction down the line,” he added.

The ABSD, introduced in 2011, imposes a 7 per cent to 10 per cent tax on Singaporeans buying their second and subsequent properties, and 15 per cent on foreigners.

Mr Chua said the ABSD is limiting demand as “buyers are holding back because they believe that the ABSD is temporary and will be withdrawn or changed”.

He suggested replacing the duty with a longer-term property tax that would steer buyers towards evaluating their capital investment against long-term costs such as taxes and management fees.

The JLL report also noted that the cooling measures have prompted Singaporeans to invest in property in countries such as Malaysia, Australia and Britain.

JLL cited data from the Monetary Authority of Singapore, which said the value of overseas property purchases by Singaporeans reached a high of over $2 billion in 2013, although the value fell to $400 million in the first half of 2015.

“A more active local residential market will better support domestic growth as it will encourage Singaporeans to invest in Singapore rather than overseas, where the risks are higher,” said Mr Chua.

Source: Strait Times

Londoners Revealed As The Most Ruthless UK Property Buyers

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New research by bridging lender Market Financial Solutions (MFS) has revealed the widespread issue within the property market of buyers being pipped to the post at the last minute. In particular, the nationally representative survey of 2,000 UK adults revealed that property buyers in London were far more likely to be ‘gazumped’ by rivals when trying to complete a purchase.

MFS’s study unveiled that 15% of adults in London – the equivalent of more than 1 million people in the capital – have lost out on a property purchase to a rival buyer despite having an offer accepted. This is three times higher than the figure of 5% from the UK as a whole. Across the country, over 1.5 million people revealed that they had lost out on their ‘dream home’ because a property purchase fell through after an offer on the house had been accepted.

The results illustrate the competitiveness of London’s globally renowned property market, with the capital ranked last year by Savills as the most competitive city in the world. Residents of the capital earn almost double the UK average, while London also ranks second in the world for foreign property investment, with £18.8 billion worth of property bought by overseas buyers in the year to June 2016, according to Knight Frank’s Global Cities report. The result is a huge amount of buying power that, as MFS’s research shows, increases the likelihood of Londoners losing out on property purchases at the last minute.

The issue of being ‘gazumped’ on a property purchase brings added costs – 3% of UK adults (1.54 million people), and 9% of Londoners, have lost out on fees to intermediaries such as solicitors and surveyors because they were pipped to the post during a property purchase. Which? has revealed that property buyers lose on average £2,899 in fees on a failed purchase, meaning that across the nation the cost of being ‘gazumped’ totals more than £4.4 billion. The survey found that an inability to access funds in time is one of the main reasons that property deals unravel at an advanced stage; 9% of Londoners said they had experienced this issue, while 1.54 million UK adults also stated they had been undone by this problem.

‘Millennials’ were found to be more at risk than older generations when it comes to being pipped to the post in the property market. Of those aged between 18 and 34, 1.18 million said they had lost out to rival buyers after having an offer accepted; 1.03 million had seen a deal fall through because they could not access funds in time; and 738,000 had lost money on intermediaries’ fees after being ‘gazumped’. To effectively compete on a property market renowned for its ruthless competitiveness, a growing number of millennials are willing to ‘gazump’ as part of their property strategy– 442,800 18 to 34 year olds admitted to ‘gazumping’ in 2016, while 590,400 millennials are considering the practice in 2017.

 

,,,read more on the The Voice

UK Rental Property Demand Falls to Two-year Low

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Rise in supply sees rent flattening or falling in many parts of the country including London, survey finds

Demand for privately-rented flats and houses has fallen to a two-year low, while the supply of properties to rent has risen in fresh evidence of a slowdown in the property market.

The Association of Residential Letting Agents said there were just 26 prospective tenants registered per branch in December, down from 32 the month before and the lowest figure recorded since records began in January 2015.

Meanwhile renters have more properties to choose from. Arla said the number of properties on the books of the typical letting agency branch rose from 185 to 188 on the month.

Rents have begun to flatten or fall in many parts of the UK, particularly London and the south, according to other survey data. Earlier this month property website Rightmove said asking rents in London fell 4.4% in 2016, with most of the fall happening in the wake of the UK’s vote to leave the EU.

In the south-east, rents rose 1.3% over the year, but fell 2.3% in the last quarter as the falls in London spread out to the commuter belt. The north-west of England recorded the worst rent rises, with tenants suffering an average 4.4% rise in the region during 2016, but fell in the last quarter of 2016.

Experts are divided on the outlook for rents in 2017. Many expect a slump in the buy-to-let market with lending criteria tightening ahead of the introduction of new taxes on the sector in April. But others say with few attractive alternatives, individuals will continue to invest in rental properties for their pension.

 

…read more on Guardian

Article 50 ruling: What to expect for UK property

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The British Government’s appeal has been dismissed by the Supreme Court in the Article 50 case in preparation to trigger the country’s au revoir from the European Union.

 

Brexit is the country’s landmark event of 2017. Or, to be more specific, triggering Article 50 is this year’s biggest influencer when it comes to the UK’s economy and politics.

The latest ruling by the Supreme Court means that PM May will now need the parliament’s support to trigger Article 50.

To see this as quickly through as possible, Brexit secretary David Davis promised to bring legislation before MPs “within days”, highlighting once again that the Government is still committed to its original timeline to kick off Brexit negotiations by the end of March.

Whilst the ruling also means that the Government has no need to consult regional parliaments, the Scottish National Party has already hinted at plans to lay out up to 50 amendments, one of them being a stronger role for Nicola Sturgeon.

Since the case was first heard, a couple of other Brexit developments have happened, the biggest one probably being May’s landmark Brexit speech. During the speech, the PM made her commitment to pulling out of the Single Market fairly obvious.

After yesterday’s events, the Sterling dropped once again against the US dollar, down to lows of $1.2438, before ending the day flat against the US currency.

So what does this mean for UK property investors?

Generally speaking, property investors can be divided into two groups: home investors and foreign investors. And although this is a worthwhile distinction to make, in most cases the biggest influencing factor when it comes to investing in property remains the same: the level of uncertainty that comes with an investment.

The ruling on Article 50 was the first stepping stone to chip away at some of this uncertainty. With the Government now promising an extremely quick turnaround to get the Bill before the parliament, we will hopefully get even more clarity shortly.

For home investors very little will change, especially considering the very quick turnaround the Government is hoping for. And whilst the parliament is completely right to scrutinise and debate the legislation, Brexit secretary Davis told City A.M. that he strongly believes that it won’t be used as “a vehicle for attempts to thwart the will of the people, or frustrate or delay the process of our exit from the European Union.“

In addition to that, the recent decision has changed very little, if not nothing, about the two basics of the country’s property market: a lot of demand and not enough supply.

For foreign investors the bargain hunt may have already started. For those hoping to buy using a foreign currency it might be worthwhile keeping a good eye on the currency exchange, especially since the Sterling has already experienced a drop.

 

source: Buy Association

House Price Growth in UK’s New Towns Outpaces Average

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Milton Keynes marks 50th birthday with a table-topping performance in Halifax report

 

House price growth in new towns has outpaced the UK as a whole over the past decade, according to Halifax.

Valuations have leapt by 32 per cent in cities built “to alleviate housing shortages” after World War II, says The Guardian, rising from £173,337 in 2006 to £228,902 last year.

That was ahead of wider growth of 26 per cent across the country, although the broader average price is still higher than in new towns, having risen from £200,059 to £251,679 in 2016.

Milton Keynes saw the fastest rise over 30 years, with the typical property increasing 601 per cent in value to reach £309,415.

Halifax, which used its own lending figures for the report, compiled the study of 26 new towns to mark the city’s milestone.

Many of the towns are “within easy commuting distance of major commercial centres”, while their lower house prices had made them a “highly popular choice”, said the lender.

The Guardian adds that several are “in the London commuter belt, with prices in Welwyn Garden City, Stevenage and Hemel Hempstead seeing particularly strong gains”.

 

source: The Week

Multi-property buy-to-let owners face squeeze

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Several news reports today have highlighted another strand of the government and Bank of England’s clampdown on the buy-to-let sector.

 

Read more at The Week