U.K Housing Market Showing Signs of Stability

Chesterton Humberts/CEBR House Price Poll of Polls found that the U.K. housing market is showing a greater stability. The report found this is largely due to the increased number of mortgage approvals as well as the greater amount of credit availability.

In all, the recent report found that house prices have remained fairly flat while London has been helping to increase the national average. In fact, approximately thirteen percent of the national average in sales is due to sales in the capital city. As such, even a slight increase in house prices in London is likely to have a significant impact on the national average, which may create an misleading figures when looking at national statistics. Nonetheless, the recent fall in world stock markets has helped make Eurozone house prices in London a relatively safe bet for investors. Some additional highlights from the report include:

•    House prices in the UK increased by 0.2 percent between August and September of this year, which further increased the amount of stabilization in prices throughout the country
•    House prices in the UK reached £176,553 in September, which is -1.6 percent lower when compared to September of last year
•    The national picture does not accurately represent the diverging trend between the North and South portions of England, as house prices in London have increased by 2.5 percent over the past year while failing -5.2 percent in the North West
•    While house prices grew in London at about the same pace as the rest of the UK in September, they have outpaced the national trend over the year
•    August saw 52,410 new mortgage approvals compared to just 49,644 in July, which represents the highest level seen since May 2010

“In recent months the gulf between asking prices and selling prices has widened as sellers, on average, have been in denial about the true market value of their homes based on the economic realities. This is most keenly observable in the difference between the Rightmove Asking price surveys and the Land Registry data,” said Robert Bartlett, who is Chesterton Humberts’ CEO, in a recent WorldPropertyChannel.com article.  “In addition, buyers appear willing to wait longer at present, without much urgency to make offers or conclude a purchase.”
Bartlett expects to see asking prices fall during the winter, which is traditionally a less active time for home buyers. When the stamp duty relief ends in March, however, he expects to see a major increase in activity. Nonetheless, experts caution that additional steps may be necessary to ensure the housing market continues to stabilize.

“Three years after the collapse of Lehman Brothers, credit conditions remain a significant obstacle to improvements in the housing market,” said Douglas McWilliams, who is the Chief Executive of CEBR. “Small improvement in mortgage lending activity will not let the Bank of England off the hook. Another round of quantitative easing is now not only expected, but it is becoming increasingly necessary.”

Spain Housing Market Experiences Difficulty with Drawing Investors

As Spain attempts to rebound from its own economic problems, the country is facing a new set of hurdles. Namely, analysts are reportedly having a difficult time determining how much the properties are actually worth. As a result of all of the confusions, investors are unwilling to make the purchases that are necessary to help the banks clear out the backlog of homes that are currently sitting empty.

The method used to calculate home price data in Spain is one of the primary causes of the discrepancy. Rather than gathering the data based on actual sale prices, the formula utilizes the appraisals that have been made by private companies. In a slow market, appraisals are heavily dependent upon asking prices, which results in a great deal of variety in estimated home values.

According to the Ministry of Public Works, the price per square meter on the homes currently for sale dropped by 11% since its peak in 2007. On the other hand, Tinsa, which is a large Spanish appraisal firm, has shown an 18% drop during this same time period. Numerous other firms have placed the drop at somewhere between 20% and 30%.

“We don’t have an accurate measure, that’s the bottom line,” said Jose Garcia Montalvo, who is the chairman of economics and business at the Universitat Pompeu Fabra in Barcelona.

The discrepancies between these figures are a matter of concern for investors, particularly after the bailout in Greece and the anticipated rescue of Ireland both failed to produce results. As such, investors are concerned about the possibility of the crisis spreading to other countries throughout Europe. While Portugal is the country that has garnered the most concern, investors are worried about Spain as well.

According to a study conducted by Luis Garicano, who is a professor at the London School of Economics, the housing boom that took place in Spain pushed housing prices up by more than 100%. In fact, two-thirds of the housing units built in Europe between 1999 and 2007 were built in Spain. As housing prices start to decline, it has been difficulty for experts to truly gauge where the value of these homes currently stands. This also means that banks are unable to determine the amount of potential losses they are looking at on their balance sheets.

“It could mean that banks will suffer high loan-loss provisions for many quarters yet,” said Andrew Lim, who is a European banking analyst with Matrix Corporate Capital in London.

About the Author: Brian Kinkade is a broker and team lead with Brokers Guild – Cherry Creek Ltd, one of Denver’s fastest growing full service Denver real estate firm. Brian’s team of Internet savvy agents service the Denver Metro area while specializing in Denver luxury homes, Colorado equestrain property and International real estate.

Expand Your Personal and Professional Network at the FIABCI-USA Fall Business Conference

The FIABCI-USA, which is a chapter member of the FIABCI, is hosting its Fall Business Conference this September 23rd through the 26th. The FIABCI, which is a non-political entity that works toward helping its members add an international component to their businesses, is comprised of chapters in 48 different countries. With members ranging from lawyers and architects to insurers and consultants, there is plenty of knowledge to be shared at the annual Fall Business Conference.

Last year, the Fall Business Conference was held in Denver, Colorado. This year, the annual event is slated to be held in Seattle, Washington at the Edgewater Hotel, which is located right on the water. Called “Connecting Continents,” participants will learn more about Asian markets as well as international market risks and opportunities. Participants will also learn about foreign investment in Seattle while also learning practical tips that can be applied toward their businesses immediately.

With so many great resources available to participants, there are many reasons to consider attending the FIABCI-USA Fall Business Conference this year. First of all, you will undoubtedly expand your business network. Even better, you will make connections with professionals from around the world as you learn new ideas and practices that you can use to improve your business. With the knowledge you gain at the FIABCI-USA Fall Business Conference, you will set yourself apart from the competition as you demonstrate a broader understanding and reach within your industry.

In addition to learning from the expertise of others, you will also have the opportunity to share your knowledge with other participants. As you break down into internationally-focused groups, you will get plenty of opportunities to get to know other participants. At the same time, the groups are large enough to provide you with the opportunity to meet with a wide variety of individuals with different types of expertise to share with you. Whether you are interested in the international market or you need to make some legal connections, you are certain to find the connections you are looking for when you attend the FIABCU-USA Fall Business Conference.

In addition to helping you expand your professional network, attending the FIABCU-USA Fall Business Conference will provide you with plenty of opportunity to make lifelong friends. As you enjoy the camaraderie of your peers, you are almost guaranteed to meet someone who you connect with. Hopefully, some of these professional relationships will ultimately translate into lifelong friendships that you will be grateful for finding.

U. K. Property Prices Continue To Rise

Property prices in the United Kingdom continued to increase in June, indicating broad stability according to reports. The latest index from Nationwide shows a seasonally adjusted 0.1 percent month-on-month, following a 0.5 percent increase in May. Only Northern Ireland saw values fall in the second quarter of 2010. In contrast, the annual rate of house price inflation dropped for the second consecutive month from 9.8 percent to 8.7 percent.

Overall U.K. house prices in the second quarter increased by 1.9 percent quarter-on-quarter. This resulted in an annual growth rate of 9.5 percent, up from 8.8 percent recorded in the first quarter of 2010.

According to Nationwide’s quarterly index, the South West of the country showed the strongest regional growth, with prices up by a seasonally adjusted 3.0 percent, and up 12.5 percent annually.  London had the strongest growth overall.  Its prices increased 13.2 percent in the second quarter. Growth in northern and midland regions was weaker than in the southern regions.

Indicators point to an increase in the number of properties for sale while the level of demand remains stable. “This would in part help to explain the recent slowdown observed in the rate of house price inflation,” said Martin Gahbauer, Nationwide’s Chief Economist.

Commercial Real Estate Expected to Enjoy a Boost in 2010

According to a report released by real estate consultants Jones Lang LaSalle, direct commercial real estate transactions volumes are poised to receive quite a boost in many parts of the world in 2010. In fact, the experts at Jones Lane LaSalle predict that volumes will increase by 30% in the Middle East, Europe and North Africa.

These predictions are being made after the market experienced better than expected activity during the first quarter, a time during which the market is traditionally quiet. At the same time, Jones Lange LaSalle cautions that there was also a 75% increase during the first quarter of 2008, at which time volumes managed to reach €20 billion.

When comparing the first quarter of 2010 to the last quarter of 2009, transactions are actually down by 15%. Nonetheless, analysts are confident the market is in a good position for the remainder of the year. This is particularly true in the UK, where the transaction volume of €7.8 billion accounted for more than one-third of all transactions and remained consistent with figures from the previous quarter. Three other countries, France, Germany and Sweden, followed closely behind, with each experiencing an increase in activity when compared to the previous year.

“The first quarter of the year is typically one of the slowest quarters; investors do not have the urgency to press on and close deals as they do toward the end of the year. Typically the first quarter is some 20 to 30% below the fourth quarter, so we do not read a 15% decrease as a sign of a slowing market,” said Richard Bloxam, who is the Director of EMEA Capital Markets with Jones Lang LaSalle, in a Property Wire article. “We expect investment activity to increase throughout the year. Already a number of transactions over €100 million and portfolio deals are under offer in the market. We estimate that direct commercial European real estate transaction volumes will reach at least €90 billion for the full year. This will be around 30% higher than 2009.”

Nigel Roberts, who is the Chairman of EMEA Research with Jones Lang LaSalle agrees, saying there is a growing amount of investor interest in obtaining quality real estate.

“This has clearly been demonstrated by movement in prime office yields when compressed in the majority of the European markets in the first quarter of 2010,” said Roberts. “London prime yields moved in by 50 basis points and continental European markets between 10 to 50 basis points with only a handful of markets remaining stable. Whilst economic recovery still remains fragile, business confidence is generally rising and with improved credit conditions the demand for real estate from core investors is driving down yields. In the short term interest rates sill offer positive cash flow opportunities for leveraged buyers but longer term investors will be looking for improving fundamentals translating into stronger rental markets.”

Property Investors Dominate Australian Real Estate Market

Mortgage specialists expect 2010 will be a good year for Australia’s mortgage industry, but with property investors replacing first time buyers as the main purchasers as reported by PropertyWire.com.

Residential property prices in Australia increased by 11.3 percent after the country’s modest 3.8 percent peak-to-trough falls in 2008. According to the latest published information from RP Data and Riskmark International, the best performing city was Darwin with prices up 17.9%. Adelaide was the worst, recording just a 5.7% increase.

The volume of mortgages last year rose 10 to 12 percent and is expected to grow 4 to 5 percent this year, according to Mark Hewitt, general manager sales and operations, of Australian Finance Group. Investors now represent about 34 percent of all mortgages arranged by AGF, up from 25 percent a year ago. For example, two out of every five mortgages arranged in NSW were for investment properties.

Hewitt said investors looked to property as a ‘safe bet’ to offset the volatility in the share market and general uncertainties surrounding other forms of investment. Investors have been coming back since the middle of last year to take advantage of a tight rental market.

Ordinary families are waiting instead of upgrading. In comparison, property investors, able to take a long term view, are hoping to ride a new upward cycle in property values.

Recovery of London Office Rental Market Underway

Tight supply and rising confidence among financial tenants are expected to boost office rentals in London in 2010, reports property consultant King Sturge.

After falling up to 40 percent in the global financial crisis, prime rents in the London financial district may rise 10 percent by the end of 2010. Rents in the West End are forecast to increase by 7.6 percent. This would mean average rents in the city of London of $77 (£47.50) per square foot and in the West End of $114 (£70) per square foot.

The predicted improvement in rents may ease investor fears that the UK commercial property market’s price rebound could be short-lived due to continued tenant weakness.

While London is poised for recovery, in the rest of the UK, King Sturge predicts rents will continue falling due to weak demand, although at a slower pace than in 2009. Experts have said the poor outlook for the regional markets could further widen a pricing gap between prime commercial properties and lower-grade assets, and this could postpone a general recovery in the sector by five years or more.

Indian Real Estate Market Improves

The Indian real estate market is on its way to recovery, with the residential real estate segment leading the way, according to a new Ernst & Young report. The demand for residential real estate has revived due primarily to improved affordability. Developers are focusing more on most projects, which are more salable, than on luxury developments. Improved liquidity, softening interest rates and price corrections have also contributed to the recovery.

Although India’s residential sector is improving, the commercial, retail and hospitality markets continue to struggle. The global economic slowdown has caused the IT sector and multinationals to halt expansion plans in the country. Analysts say that most retailers have put off their expansion plans in India due to the decline in their revenues and profitability. And developers have moved away from hospitality projects, which require a long period of time to complete.

The report names Delhi as the most preferred Indian destination for real estate developers and investors. Mumbai is a close second.  Key factors that help Delhi retain its top position are the fast-paced improvements in physical infrastructure, such as the metro railway and modernization of the international airport.

Foreign Investors Test U.S. Markets

From 2005 through 2008, foreign buyers claimed at least $100 billion of US commercial property, a significant sum, according to Real Capital Analytics as noted in an AFIRE News article. In recent years, foreign investment in United States real has accounted for less than 10 percent of all property acquisitions. However, foreign investors are starting to take interest in the U.S. again though origins of the capital are changing and actual acquisitions so far have trended on the low side.

Through third quarter of 2009, acquisitions by non-U.S. investors have totaled just $2.1 billion. However, the market share of foreign buyers is up slightly overall, as a percentage of all U.S. acquisitions, and with notably higher investment for office, hotel and apartment sectors.

Foreign Investment into U.S.

Israel’s Increased Interest Rate Raises Economic Concerns

Israel‘s recent increase in the mortgage interest rates has the market concerned that the higher rates will discourage borrowers and lead to a drop in property purchases. Israel has been the world’s top performer in residential real estate. Two key factors have helped Israel defy the worldwide real estate slump: lack of available land for development and tax breaks for investors. Prices rose 12.5% in the second quarter from a year earlier, double the increase for Switzerland, the second best performer among countries tracked by London-based property consultants Knight Frank.

Israel is one of the first countries to raise interest rates since the start of the global recession. In August, the Bank of Israel raised the interest rate to 0.75 percent to combat rising inflation. Some economists are predicting that interest rates will go up to 2.5%, according to propertywire.com.

While some predict increased interest rates will cause property prices to plunge, others forecast it will stabilize the market.

Prices will probably ‘stabilize’  rather than plunge, said Ayelet Nir, chief economist at IBI Ltd.  However, in some locations in Jerusalem, Tel Aviv and the coastal city of Netanya, prices are likely to remain high due to a constant demand from Jews from the US, France and the UK, according to Bernard Raskin, regional director of Re/Max Israel, the country’s largest property broker.