London House Prices 'Frenzy' Propels UK Property Market Back to Growth

According to Rightmove, a property website, home prices in UK increased by 2.8% in October as revealed on this article by Jerin Mathew of IB Times on October 21st, 2013.

UK home prices up 2.8% in October, according to Rightmove. (Reuters)

UK house prices rebounded from two previous monthly falls in October as they rose by more than £50,000 in the capital city.

According to property website Rightmove, the average asking price for homes increased by 2.8% to £252,418 (€156,274, $252,418) in October, returning to a growth trend that started in January 2013.

London witnessed an "unsustainable" 10.2% rise in asking prices in October, following falls of 2.8% and 1.5% in August and September, respectively.

Many of October's best performers are boroughs in inner London, the website said. Among London boroughs, City of Westminster saw the highest 11.9% increase in house prices, followed by an 11.8% increase each in Kensington and Chelsea and Hammersmith and Fulham.

Home prices are now up 5.6% on July's all-time high of £515,379, pushing the year-on-year increase in London to 13.8%, according to Rightmove.

"Fewer sellers coming to market in the capital during the traditional summer recess resulted in total price falls of 4.3% 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% a month," Rightmove director Mills Shipside said in a statement.

"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."

Demand-Supply Mismatch in London

Analysts have warned that the continued rise in home prices in the country is primarily due to higher housing demand exceeding supply.

Rightmove noted that "London needs an increase in supply from a combination of more new-build properties and more existing owners coming to market" in order to satisfy at least some of the rising demand.

It added that though the number of sellers in the capital increased 15% on month in October, the recovery is from a low base.

Overseas investors are considering London properties as safe havens for investments. Rising overseas demand is swallowing up much of the new-build supply, adding to shortages and price increase.

"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," said Shipside.
"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".

Income-House Price Mismatch

In addition, taking a mortgage will be a "greater challenge" for many Londoners that are planning to buy a house, says the website.

Rightmove research indicates that 80% of those who intend to buy in the next 12 months will put down a deposit of 10% or more, a substantially high amount given the current prices of houses.

It added that that the current range of 5% deposit Help to Buy products is of no benefit to many Londoners as the income to service a mortgage will be a greater challenge for them.

"In London, the buying power required to get onto or move up the housing ladder means you have to tap into the Bank of Mum and Dad rather than buy courtesy of a helping hand from Uncle George. Indeed, nearly two in five would be first-time buyers in the capital state that they expect to receive parental assistance," said Shipside.

Article Source: http://www.ibtimes.co.uk/articles/515552/20131021/rightmove-house-prices-london-safe-haven-demand.htm

Opportunities as the UK Property Market Comes Back to Life

This article by Richard Watt of Money Observer on October 16th, 2013 reveals that property market in the UK has now regain its life and eager for further developments.

Housing has a unique place in the UK economy. There is a special sense of fulfilment in home-ownership.

‘First-time’ buyers have a priority on the political agenda, while rising home values translate to near-instant voter gratification. A revival in the housing market is front-page news.

This national attitude to our homes creates a number of anomalies. One is the traditional approach to investing in the housing market through direct purchase, buying or upgrading a home or taking on buy-to-let. Home-ownership can be immensely rewarding, but a house is a particularly illiquid investment, while mortgages create a conduit from Bank of England base rates to disposable income that is short, brutal and sometimes nasty.

The flotation of Foxtons, the London-area estate agent, is a sign that the equity market is increasingly providing an alternative route to participation in the property market. A basket of shares might not keep you warm at night, not in a literal sense, but it is a lot more liquid, shouldn’t require a six-figure mortgage and its sensitivity to interest rates is a little less direct.

The Foxtons IPO was heavily over-subscribed, rising 16 per cent on the first day, valuing the business at more than £650 million. Foxtons has some 40 offices, mainly in central London. It is an exceptionally well-run company, with special strength in marketing. The average price of its house sales is £400,000, which puts it in the sweet spot in terms of transaction growth as the recovery develops. It is the right section of the market for the second phase of Help to Buy, which will provide mortgage indemnity for homes worth up to £600,000. In our view, Foxtons is in a position to increase its footprint potentially to 100 offices and possibly more.

Foxtons is not the first estate agent to come to the market. Countrywide floated in March and has outperformed the FTSE All Share (ex investment trusts) by 40 per cent since then (to 24 September). Savills, since its near-term trough in the midst of the eurozone crisis on 4 October 2011, has outperformed the FTSE All Share by 134 per cent.

Estate agents are an interesting and expanding area of the equity market, but the heart of the sector in equity terms is the housebuilders. The sector has seen tremendous outperformance in recent years, with key companies such as Persimmon and Barratt Developments, which over the past three years have outperformed the FTSE All Share by 126 per cent and 156 per cent respectively. In our view, despite inevitable set-backs, the sector should continue to offer robust, market-leading returns.

Current demographics suggest the demand for new housing in the UK should run at around 260,000 units per year, but the market is only supplying half that, around 130,000. It is highly unlikely that supply will reach, let alone overtake demand, on almost any scenario.

The block has been financing, with capital constrained banks requiring significant cash deposits. The government – and everybody who reads a newspaper or watches television or listens to the radio – is aware of this and given the economic benefits of house-building it has taken some bold measures.

The first phase of Help to Buy, under which the government lends new home-buyers 20 per cent of the price towards a 25 per cent deposit, is already having a significant impact, with 30 per cent of new-built homes being reserved through the scheme.

The second phase starts in 2014, providing mortgage guarantees, and should stimulate the market further. The schemes are intended as temporary kick-starts, but the first phase is proving so popular its £3.5 billion funding is likely to expire at some point in 2015 – a date whose proximity to the next election suggests to us it could be replaced, should need arise, by something either as good or better. In the meantime, the banking sector should by then be further on the road to recovery, opening the possibility that affordable commercial mortgages will increasingly become available.

A less publicised but important change is in planning law. Under the new National Planning Policy local authorities are required to maintain a five year plan. In the absence of such a plan, where any planning application is denied, it will be automatically granted on appeal.

This has unleashed fresh tracts of buildable land, a flow unlikely to be completely staunched as plans come to be adopted more widely. So much for the environment – what about the stock specifics? Housebuilders have done well – is there more to come? In my view there is and the numbers tend to support a positive argument. The key decision is whether the UK property market will continue to recover into the medium to longer term.

Let’s take Barratts as an example. We believe it is capable of achieving a return on equity of around 18 per cent on a two to three year view as it builds out land acquired in recent years at attractive profit margins. We expect the industry to be building around 170,000 units a year by the end of this period, significantly higher than current levels but still well below the demographic requirement. From this level, it fair to assume that Barratts’ unit sales can continue to grow at relatively modest minimum of 4-5 per cent a year – given natural demand, government support and ongoing economic recovery – that would leave Barratts with around 75 per cent of its earnings free to distribute as cash to shareholders, which at current share prices implies a dividend yield at around 10 per cent. That is a high yield for a well-run business in a growing market and we would expect most investors to accept something significantly lower, possibly down to around 5 per cent – and that, in turn, implies a much higher share price.

One of the most satisfying aspects of investing in UK mid-cap equities is the dynamism and variety of the opportunities. As the property market comes back to life, it is likely there will be mid-cap companies there to reap the benefits. And as they say in the property business – we are eager for further developments.

Article Source: http://www.moneyobserver.com/news/13-10-16/opportunities-uk-property-market-comes-back-to-life

Housing Market Boosts Confidence

This article of the Express on September 23th, 2013 reveals that the economy is now on its strongest levels because of the rise of market housing and jobs.

Consumer confidence in the economy has improved to its strongest levels in at least two-and-a-half years as optimism about the housing market and jobs rises, a report has found.

Sentiment towards the housing market is at its strongest since Lloyds Bank's Spending Power report began in November 2010, while worries about employment were also found to have eased.

Almost one fifth (18%) of people felt positive about the economy in August, showing a sharp increase from just over one in 10 (11%) in January. The proportion of people feeling negative about the economy fell to 31%, showing the lowest levels since research began.

These findings helped Lloyds' overall consumer sentiment index to rise to an all-time high of 115 points in August, marking a 10 point increase since the start of the year.

Patrick Foley, chief economist at Lloyds Bank, said the findings were "very encouraging". He continued: "Increasing consumer sentiment may in time embolden consumers to spend, so helping to underpin the wider economic recovery. In turn, such spending would further help improve the outlook for growth and jobs."

A new high of 39% of consumers were feeling positive about the housing market, which has recently seen a surge in activity following Government schemes such as Funding for Lending which have improved mortgage availability and led to some lenders offering their lowest ever rates.

House prices have also been back on an upward march in recent months, helping some home owners who have seen falls in the value of their property in recent years and who may have previously been stuck in negative equity.

People living in Northern Ireland, which has seen some particularly sharp drops in house prices before more recent signs that prices are stabilising, were the most likely to be downbeat about the housing market. Nearly three quarters (74%) of those surveyed in Northern Ireland said the housing market is "not good" or "not good at all", as did 72% of those in the North of England.

Meanwhile, negative feelings towards the employment market continued on a downward trend. Some 81% of consumers said the jobs market is "not good" or "not good at all", marking a decrease from 82% in July and 87% in May. Young people were the most likely to be upbeat about the employment market. More than one fifth (22%) described it as "somewhat good", compared with 16% of consumers generally.

People are also feeling less negative about how much money they will have in the coming months. The overall balance between those who feel they will have more money in the future minus those who predict they will have less was minus 3% in August, improving from minus 5% in July.

Article Source: http://www.express.co.uk/news/uk/431441/Housing-market-boosts-confidence

Buying into Britain

This interesting article by Chen Dujuan of Global Times on September 15th, 2013 shows the milestone of Chinese investment in Great Britain.

Two years ago, the BBC made a TV documentary called "The Chinese are coming," focusing on growing Chinese investment in Africa and South America. Now, the Chinese are coming again, but this time to the home country of the BBC: Britain.

Many of the country's well-known brands have been either wholly acquired or bought into by Chinese firms, including Weetabix, Thames Water and Heathrow Airport.

"There are around 500 Chinese companies currently investing in Britain and taking advantage of the world's most open investment environment. We welcome more," Daniel Carvalho, China marketing and communications manager with the UK Trade & Investment Office at the British Embassy in Beijing, told the Global Times on Tuesday.

"I think we're seeing the beginning of a very strong trend of Chinese investment into the UK," Carvalho said.

Chinese investment in Britain reached $8 billion in 2012, more than the total from 2009 to 2011, with domestic firms expanding into areas such as high-end manufacturing, infrastructure and research, the Chinese Embassy in London said in January.

From the beginning of 2013 to early August, China has invested more than $2 billion yuan in the country, Zhou Xiaoming, minister counselor for commerce at the Chinese Embassy in Britain, was quoted as saying by the 21st Century Business Herald on August 10.

Zhou said that Chinese firms will announce new infrastructure investment worth hundreds of millions of pounds in Britain in September, the report said.

Desirable sectors 
China has made breakthroughs in infrastructure investment in Britain in recent years, partly due to local preferential policies.

In 2012, China's sovereign wealth fund China Investment Corp bought an 8.68 percent stake in Kemble, which controls Thames Water, and acquired a 10 percent stake in Heathrow Airport.

Gingko Tree Investment Ltd, a fund wholly owned by China's State Administration of Foreign Exchange, also invested in a British water utility company last year.

Companies owned by Hong Kong billionaire Li Ka-shing control 30 percent of Britain's power supply, as well as 25 percent of its natural gas and 7 percent of the water supply.

Property is another new area of interest for Chinese investors.

In July, Ping An Insurance Group bought London's landmark Lloyd's building for 260 million pounds ($411 million). 

Dalian Wanda Group in June spent around 700 million pounds to develop a real estate project in London, including two apartment buildings and a five-star luxury Wanda hotel.

In May, Beijing-based property developer Advanced Business Park signed a $1.5 billion deal with London's city government to develop Royal Albert Dock.

Wang Jianlin, chairman of Dalian Wanda, told the Beijing News in June that the real estate project is "a big bargain for Wanda," which partly explains these firms' enthusiasm for property in Britain.

The land price for the project is much cheaper than in Beijing, and the sales revenue will be far more than the investment costs, Wang said.

Frank Chen, head of research at the China office of commercial property services company CBRE, told the Global Times Tuesday that the amount of high-quality property available for investment in Asia Pacific is still limited compared with North America and Europe, so Chinese investors are expected to focus on property in gateway cities that are capable of generating reliably stable returns on investment.

Chinese companies have also shown interest in buying high-end manufacturing brands in Britain and setting up R&D centers there.

Wanda acquired a 91.81 percent stake in British yacht maker Sunseeker in June and Chinese automaker Geely bought black cab manufacturer Manganese Bronze in February.

Companies including Shanghai Automobile and Huawei Technologies have set up or expanded research centers in the country.

Local benefits
"The British economy is growing again after several years of stagnation, so the timing is right for Chinese investors," Qing Wang, professor of marketing and innovation at Warwick Business School in Britain, told the Global Times Wednesday.

She said that Britain's sound legal system and open economy as well as the status of London as an international finance and services center make the country an attractive destination in Europe for Chinese investors.

Preferential policies are also playing an important role. Britain has chosen an "open door" philosophy to foreign investment in almost all of its industrial sectors, Michele Geraci, head of research at the Global Policy Institute, a think tank under the London Metropolitan University, told the Global Times Wednesday.

"We want to be the destination for Chinese investment. Tell other Chinese investors to come to London and spend their money," British Prime Minister David Cameron told Fortune magazine in May.

Chinese companies will be made to feel welcome, and will receive the full support of the British government, the British Embassy's Carvalho said.

A competitive tax regime and highly skilled workers are Britain's other advantages, Carvalho said. "We have hundreds of billions of foreign investment in Britain, so we're used to it. It's how our economy works - we accept investment from overseas, and we also make huge investments around the world ourselves," he noted.

Wang said that both governments have set a target to boost bilateral trade, and that the two countries can combine complementary assets and competencies, offering huge potential for Chinese firms investing in Britain.

Foreign owners welcome
Qing Wang and Michele Geraci both agreed that British people are not too concerned about local firms being bought by foreign investors, so long as it brings more employment to the country.

Chinese companies that wish to invest in the UK should be prepared to be more transparent about their shareholding structure, so that the sellers know exactly who is buying their assets, Geraci said.

Carvalho suggested that foreign investors should have "a PR strategy to engage with the UK media and local communities to build trust and gain confidence." The British Embassy can offer advice on this, he noted.

It is important that Chinese firms understand and abide by the rules and regulations of the British legal and economic system, Wang said, expressing the hope that Chinese firms can develop innovative products and global brands through investing in Britain.

Zhou with the Chinese Embassy in Britain suggested that Chinese firms could take advantage of the innovative advantages in Britain and cultivate their brands there, the 21st Century Business Herald report said.

Zhou said that the eurozone crisis has offered advantageous timing for Chinese companies, which can depend upon Britain's status as an international center and its open environment to expand into the international market, according to the report.

Article Source: http://www.globaltimes.cn/content/811462.shtml#.UjZiRT_tYh8

Prime Property Prices in Central London Still Rising

This article of the Property Wire on August 26, 2013 shows that prime property prices in central London continued to rise in August but there are indications that buyers are becoming more resistant to continued price rises, especially at the top of the market.
 
The latest central London sales index from Knight Frank shows that property prices in London’s best postcodes increased by 0.6% this month and so far this year prices have risen by 4.8%.

Marylebone and Notting Hill recorded the largest rises over the course of the month, up by 1.5% and 1% respectively. Islington, City Fringe and Hyde Park all reported price growth of 0.9% in August.

In spite of record prices, enquiry levels are still robust and interest among prospective buyers remains high across central London. The number of new applicants is up by 33.9% over the year to date compared to the same period in 2012 and the number of property viewings conducted over this period is up by 18.5%.

At the same time annual price growth for properties in Greater London is now outstripping prime central London, boosted by the city’s continued economic recovery and government policy.

Figures from the Office of National Statistics show that property prices in Greater London have risen by 8.1% over the past 12 months. In comparison the Knight Frank Prime Central London Sales Index is up by 7% on an annual basis.

Price rises in prime central London are primarily being driven by homes in the sub £1 million and £1 million to £2.5 million price bracket.

Homes in these price brackets increased by around 1% in August and are up by 8.7% and 7% respectively over the year to date. Comparatively, homes in the £5 million to £10 million and the £10 million plus price brackets increased in value by 0% and 0.2% month on month and are up by 2.6% and 1.6% respectively so far in 2013.

Knight Frank says that key factors driving price growth and interest include the city’s reputation as a safe haven for investment, and the value of the pound. However the firm’s global head of residential research Liam Bailey pointed out that performance has outperformed forecasts.

‘Last year, we forecast that prices would remain unchanged in 2013, marking an end to the strong run the market has seen since early 2009. Our rationale was that the increase in Stamp Duty would have an impact on the top end of the market and there would be resistance to price growth from domestic and international purchasers,’ he explained.

‘In the event we overstated the negative impact of the 5% to 7% Stamp Duty rise for £2 million plus properties. The further weakening in sterling in the first half of the year helped to boost overseas interest and domestic demand has been aided by London’s continued economic recovery and, arguably, from the government’s Help to Buy scheme, which was launched at the end of the first quarter this year and has boosted sentiment across the market,’ he added.

He also said that while Help to Buy, with its £600,000 valuation cap is a more significant factor in the wider mainstream market, rising housing market sentiment, as reported in the firm’s latest House Price Sentiment Index, is infectious across markets and price brackets and is likely to act as a positive influence in terms of future pricing, even in London’s prime
market segments.

‘We have therefore raised our forecast for prime central London price growth for 2013 to 6%,’ he added.

Article Source: http://www.propertywire.com/news/europe/prime-london-property-prices-201308268161.html

UK Property Firm Reports Surge in Interest from Australian Investors

PRWeb on August 20, 2013 reveals Knight Know international's interest has extended it's reach into the outback after seeing the high demands in the UK property market from Australian investors.

After selling properties in Asia, the Far East and The Middle East, Knight Knox International has now extended its reach into the outback, after seeing an upsurge in the amount of interest in the UK property market from Australian investors. 

Following the Knight Knox International’s exhibition team’s first ever attendance at an Australian property exhibition, the North West investment firm can report that interest from Australia is indeed high, after taking over 89 enquiries in the three-day show.

Two main factors are being identified as the reason for this upsurge. The first of which is the costly nature of the Australian property market which freezes out many of its own home-grown investors.

Identified in the 2013 Annual Demographia International Housing Affordability Survey as the third most unaffordable major market, properties across Australia continue to experience rises in price.

So much in fact, that the house price index for 8 major cities in Australia rose by 2.6% during Q1 2013, with a surge of 8% in properties in Darwin, an upscale of 6.1% in Perth and a rise of 3.6% in Sydney, according to the Australian bureau of statistics.

The second reason behind this rise in Australian investment is the continuing depreciation of the Australian dollar causing many to put their money in UK Stirling and property, allowing them to both secure their funds and gain financial rewards.

The value of the Australian dollar has been dipping dramatically since April, with the IMF reporting that the dollar has depreciated by around 10% since; this is just one of a series of major drops the dollar has experienced, it also fell by about 7 per cent between May and mid-June and falls such as this, are another reason behind the upsurge in interest in the UK property market.

Alasdair Mcdonald, a member of the Knight Knox International exhibitions team spoke of the rising interest from Australian investors, which he saw direct evidence of at the Sydney Homebuyer and International Property Investor Show.

Alasdair commented: “When discussing potential investment options with Australian investors their true feelings come to the fore, they expressed that there is no country that they would prefer to invest in more than the UK because of the security and also because they are investing in pounds sterling, as well as generating a steadily increasing income on the net rental side. Also as an overseas investor they will be paying zero capital gains tax and be taxed considerably less on their rental.”

The Knight Knox International Exhibitions Team will continue exhibiting on the team's first visit to Australia on August 23rd at the Homebuyer & Property Investor Show, Melbourne.
Investors are urged to come along to the three day event which comes to a close on the 25th of August, to take advantage of exclusive offers the team will be offering in the UK buy-to-let and student accommodation market at the event.

 Article Source: http://www.prweb.com/releases/2013/8/prweb11027188.htm

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