All Posts by Charlie Overend

Property investment in Birmingham continues to boom

Research carried out by PwC and thinktank Urban Land Institute has revealed that Birmingham remains a UK property investment hotspot, ranking above both Edinburgh and London.

The report –  ‘Emerging Trends in Real Estate Europe’ – found that Birmingham, often viewed as the UK’s second city after London, finished in joint 21st place in the list of the best investment locations for 2018. Of domestic locations, only Manchester – another thriving property investment hotspot – finished higher, one place above Birmingham in 20th place.

Scottish capital Edinburgh, meanwhile, was in 26th place, while London had to settle for 27th spot. The research, which analyses the overall investment prospects for 2018 of major cities in Europe, is based on the viewpoints of over 800 real estate professionals. This includes lenders, agents, consultants, developers and investors. Birmingham’s position could be partly reflective of wariness from investors about short-term growth prospects in London. Regional cities, which offer lower house prices and similarly high tenant demand, are at the moment offering more to investors than the capital.

In the long-term, though, the ongoing uncertainty over Brexit – with negotiations still stalling at the first stage – is continuing to have an impact on property markets across the UK. Birmingham, though, is thriving more than most. For a number of years now, it has become an increasingly popular location for major companies to use as a base, with HSBC UK choosing to create a new headquarters at the city’s Arena Central development, while inward investment has also been received from a number of firms relocating to the city for greater affordability and improved transport links.

Although progress is slow, work is also set to begin soon on HS2 – the high-speed rail line which will cut commute times between Birmingham and London. Furthermore, HMRC plan to create a regional hub at Arena Central development, bringing with it thousands of new jobs.

“Investor sentiment in the city has received a boost from the election of a new mayor, the negotiations around a second devolution deal and the progress of the many infrastructure projects taking shape in the city,” Midlands chairman Matthew Hammond commented. He added: “This report reveals that investors are focusing on cities and assets rather than countries and, like regional centres in a number of other European countries, Birmingham offers good value, unrivaled transport links and is located at the heart of the UK’s distribution network.”

The full 31-city list is reproduced below.

  1. Berlin
    =2) Copenhagen
    =2) Frankfurt
    4) Munich
    5) Madrid
    6) Hamburg
    7) Dublin
    8) Stockholm
    9) Luxembourg
    10) Amsterdam
    =11) Barcelona
    =11) Lisbon
    13) Vienna
    14) Paris
    15) Prague
    16) Oslo
    17) Milan
    18) Helsinki
    19) Budapest
    20) Manchester
    =21) Birmingham
    =21) Lyon
    23) Warsaw
    24) Zurich
    25) Brussels
    26) Edinburgh
    27) London
    28) Rome
    29) Athens
    30) Moscow
    31) Istanbul

UK Cities House Price Index – September 2017

City house price inflation is running at 4.9% per annum down from 6% a year ago. Quarterly growth rate at a 14-month high supported by increased sales volumes.
Edinburgh is the fastest growing city (6.7%), overtaking Manchester (6.5%) and Birmingham (5.9%).
Nominal house price growth in London has stabilised at 2.3% per annum. Over four-fifths of markets covered by the London City index are registering real house price falls.

City house price inflation is running at 4.9%. Edinburgh is the fastest growing city, overtaking Manchester. House price inflation across London City is 2.3% although low growth means
85% of markets are registering price falls in real terms. We consider the outlook and the impact of a possible increase in interest rates.

Prices and sales volumes rising

The annual rate of UK city house price growth is 4.9%, down from 6% a year ago.  The quarterly rate of growth is at the highest level for 14 months (Fig. 1). This trend has been supported by a nationwide increase in housing sales over the last quarter compared to the previous 12 months. This unseasonal increase in sales is likely a result of households delaying purchases earlier in the year at the time of the General Election.

Price falling in real terms across five cities

Across the 20-city index, annual growth ranges from -1.8% in Aberdeen to +6.7% in Edinburgh. This the smallest variation in growth since July 2015 and is a result of a
marked slowdown in price inflation across all cities in southern England.

There are five cities where the current level of nominal house price growth is below the rate of consumer price inflation – Aberdeen, Cambridge, Oxford, London and
Cardiff.

Scottish cities out-performing on rising sales

While most cities are registering house price growth below that a year ago, there are six cities where the annual rate of growth is higher, most notably in Scotland. Residential transactions data from HMRC shows there has been a 20% increase in the monthly run rate of sales over the last quarter in Scotland. Increased activity has supported an acceleration in the rate of house price growth. Edinburgh is the fastest growing city covered by the index (6.7%), overtaking Manchester (6.5%) and Birmingham (5.9%) where the rate of inflation has moderated slightly.

Glasgow has also recorded a marked increase in the rate of house price inflation from 1.8% a year ago to 5.3% today. While Aberdeen has registered a 15% decline in average prices since 2015, the rate of annual rate of growth has slowed to -1.8%, the lowest level for exactly 2 years. Fig. 3 tracks the indices for house prices in Scotland’s three major cities since 2007 showing the rise and fall of prices in Aberdeen and the recent acceleration in Edinburgh.

Legal & General announces new Build to Rent site in Birmingham

Funding has been agreed on a prime Build to Rent (BTR) development site in Birmingham, Legal & General announced recently.

The site, known as Newhall Square, will cost £53 million and is the sixth UK city in which Legal & General has invested in BTR. This latest investment now brings the number of BTR units in its pipeline to more than 1,700, following previous investments in Salford, Leeds, Bristol, Bath and Walthamstow.

The proposed development – which has planning permission for 220 residential units and 7,500 sq ft of ground floor commercial space – will also include a public square and 61 car parking spaces. A forward funding deal, with residential developer Spitfire Bespoke Homes, has been agreed to construct Legal & General’s latest investment project.

Newhall Square is located between Birmingham’s Central Business District and the retail/leisure hub of the Jewellery Quarter. It’s right in the heart of Birmingham’s city centre and the new apartments, once completed, will benefit from fine canal-side views.

Birmingham – often viewed as the UK’s unofficial second city – is currently undergoing significant regeneration, with more capital currently ploughed into infrastructure projects than any other European city. One of these – the Paradise development, a mixed-use scheme set to deliver 1.8m sq ft of new office, retail and leisure space, as well as generating 12,000 new jobs – is only five minutes’ walk from the new BTR development.

The demand from tenants in Birmingham is high and growing by the year, helped by a rapidly expanding population. Some 1.1m people currently call Birmingham home – up by 100,000 since 2004 – and population growth in this part of the UK is currently the third fastest in the country, only bettered by London and Bristol.

It’s also home to one of Europe’s most youth-heavy populations, with those aged under 30 accounting for around 40% of all residents. Despite this, the amount of housing stock available is at a record low and worsened by low levels of house-building in recent years.

As a result, the private rented sector – and BTR in particular – is becoming an increasingly important cog in the property industry machine, especially where younger tenants are concerned.

Legal & General is pumping in approximately £1bn to the BTR sector, ‘to help provide the UK’s population with high quality, affordable living at all stages in their life cycle’.

“This development, in a highly sought-after area of Birmingham, links the industrial heritage of the Jewellery Quarter with the modern business district, Dan Batterton, BTR fund manager at LGIM Real Assets, said.

“The location is ideally suited to high-quality, affordable and professionally-managed rental accommodation that can help to address the supply demand imbalance in the city. Given the huge infrastructure investment in Birmingham, it has been a target location for us in building a high-quality and well diversified portfolio of BTR schemes. We expect to continue adding schemes and new locations over the coming months.”

James Lidgate, director of housing at Legal & General Capital, added: “With a growing population that is living younger for longer, the strong gravitation of people back into areas of high population density where they can live, work and socialise productively is speeding up. The UK needs urban centres that are fit for purpose and can support vibrant, sustainable communities.”

 

Office and Hotel Sectors to provide the biggest property investment opportunities

More than a third of institutional investors believe the biggest real estate investment opportunities will be found in the office sector and the same number in the hotel & hospitality industry over the next 12 months, according to a new study.

The study showed that three in ten institutional investors thought the industrial sector would present the biggest commercial real estate investment opportunities over the next 12 months while one in five cited the retail & leisure sector.

The research also revealed that 44 per cent of institutional investors expect commercial property yields to increase in the next 12 months, just 22 per cent believe they will decrease. Moreover, two in five plan to increase their allocation to European commercial real estate.

Emmanuel Lumineau, CEO at BrickVest, commented: “We expect to see the highest level of volatility from the office sector as many international firms currently headquartered in the UK may put decisions on hold over their long-term office space requirements. If the UK no longer gives businesses access to the European market, they may need to spread their staff across multiple locations to more efficiently access both the UK and European market.”

Furthermore, the research showed that the main challenge facing institutional investors when investing in commercial real estate is a lack of liquidity. Nearly three in five highlighted this option. More than a third cited that regulatory and compliance reporting costs are too high while the same number felt real estate projects did not match the criteria. A third thought the process is too slow and inefficient and one in five didn’t think there was enough access to their investment.

The study also highlighted the ways that institutional investors plan to access commercial real estate investment opportunities over the next 12 months. Despite the overwhelming majority of respondents selecting property funds and REITs, one in five plan to do so through a direct investment platform.

London house prices waver and UK sales demand falls

According to an influential industry body there has been a sharp fall in property demand in London during September.  Numbers of new buyers and sales have fallen again.

City A.M.’s website, London’s first free daily business newspaper, reported the news here: http://www.cityam.com/273709/more-signs-wavering-london-house-prices-uk-sales-demand in their article titled: “More signs of wavering London house prices as UK sales demand falls”.

The Royal Institution of Chartered Surveyors (Rics) said that a net balance of 20 per cent of surveyors had noticed a fall in demand during the month of September 2017.

 

 

UK Property Paints an Unsure Picture

Brexit property marketAs I write this in the summer of 2017 it is apparent that the UK is still unsure as to the future with not only Brexit on the horizon but a clouded political picture. Add that to the increase in the taxation burden for Property Investors and certain markets slowing in certain areas of the Country the property picture certainly paints an unsure picture!!

In my opinion, London is too hot!! Prices have slowed and Sellers appear to be taking lower offers. This means that Investors are looking for better returns on their money and this is where the
Northern Powerhouse Cities are taking over. The likes of Manchester, Leeds & Liverpool have been and are still steaming ahead with respect to investment from not only here in the UK but also Overseas investment, notably from the Far East. This major investment in the larger Cities has a knock-on effect to the smaller satellite Towns along the M62 corridor and the majority of those are seeing regeneration schemes to the centres by way of re development and investment. And it is in these Towns that the yields and returns currently stack up nicely!!

I believe that we are due a correction in the market but how long that lasts for, then who knows before the prices go again in our boom and bust property cycles!!

London Property Market Stutters

The demand for property in the London area has dropped the general slowdown across the London market shows little sign of abating.

With economic growth slowing, London property sellers are finding it harder to sell their homes according to the latest figures.

The Independent newspaper published an article on – “London property market stutters as demand for homes eases” http://www.independent.co.uk/news/business/news/london-property-market-homes-demand-drops-housing-market-prices-a7904076.html

The Independent explained that the economic downturn has affected London the worse, with figures from Acadata last week showing that sale prices in the capital fell for a third consecutive month in June.

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