Residential property returns increased to 16.8% in 2006
Residential property returns increased to 16.8% in 2006, marking the end of three years of decelerating returns, according to the Investment Property Databank’s (IPD) UK Residential Index.
Total returns for the year were in line with those on equities and just below those on commercial property (18.1%). Bonds returns were slightly negative thanks to rising yields (-0.1%). Over the last six years, both residential and commercial property delivered returns just shy of 14%.
Ian Cullen, co-founding director of IPD, said: “These impressive 2006 returns reflect the performance of a small group of specialist residential investors. IPD’s major project for 2007/8 is to work closely with the British Property Federation to deliver a major increase in our coverage of this market – targeting significant parts of the estimated £511bn of private housing investment reported by Sue Foxley at the IPD Residential Launch.”
Ashford Borough Council is first authority to agree PFI deal
Ashford Borough Council has become the first district authority to agree to a Private Finance Initiative deal to regenerate a housing estate.
It has signed a 30-year contract that will allow the council to use £200m in investment over the duration of the contract.
The regeneration of Stanhope Estate will see the demolition of 410 flats, the provision of 442 flats and houses, a new commercial centre (once the current shopping centre has been demolished) and improved community facilities.
Ashford Borough Council head of housing Tracey Kerly said: “This has been a hugely complex process but ultimately will benefit thousands. It’s not just a straightforward refurbishment contract to bring homes up to standard but full-scale regeneration of a mixed-tenure estate.
“As well as a better environment we aim to create a far more balanced community by introducing a mix of rented, shared ownership and open market housing.”
The Chysalis consortium will regenerate Stanhope over the next five years. The consortium is made up of the Gleeson Group (development partner), Moat Housing Group (registered social landlord responsible for day-to-day housing management) and the Nationwide Building Society (which is funding the project).
City of London’s lowest level of office supply since 2001
According to the latest Central London Market Report from Jones Lang LaSalle, the City of London is experiencing its lowest level of office supply since 2001 as the opening three months of 2007 saw almost 1m sq ft of existing space taken off the market.
In addition, a further 1.8m sq ft is now under offer. Overall, vacancy rates have decreased from 7.5% to 6.1%, while Grade A vacancies have declined from 3.8% to 3.4%. Strengthening demand will lead to more rental growth this year. The Banking and Finance sector continues to dominate demand for Grade A space and was up by 34% in the first quarter.
“The City is now experiencing real selective shortages, particularly for larger units of immediately available office accommodation. In fact, there are no Grade A units in excess of 100,000 sq ft available. Given this lack of immediately available accommodation we expect to see more occupiers considering pre-letting as a way of satisfying their requirements”, said Neil Prime, head of office agency at Jones Lang LaSalle.
“We believe that this increase in demand for pre-lets could result in more than two million square feet of speculative development scheduled for completion between now and the end of 2009 not being delivered to the marketplace. The developers have read the cycle well and are delivering their product at a time of strengthening demand”, he concluded.
Largest commercial property sale in Birmingham to date
The Birmingham Development Company has put The Mailbox and The Cube in Birmingham up for sale at £300m, circa 5.5% yield.
The site is home to the BBC, Telewest and Network Rail, 14 restaurants and bars and 144 apartments. The sale will include the 25-storey Cube and the final phase of the Mailbox, which is currently under construction. It should be completed by early 2010. It has been valued at £100m, while the asking price for the Mailbox is £200m.
Alan Chatham and Mark Billingham, co-owners and directors of Birmingham Development Company, said: “The sale of the scheme will allow us to focus on new projects both within Birmingham and elsewhere. First and foremost we will complete The Cube which will add a further 500,000 sq ft in addition to 1.5m sq ft of space at The Mailbox.”
The scheme’s trading figures have netted over £60m in 2005/6, and sales transaction value is well above the average. Currently it commands an income of approximately £10m per annum made up of 45% offices, 25% retail, 13% restaurants and 17% car parking with high growth expectations.
Philip Cropper of CBRE Real Estate Finance, who represents the vendors, said: “The sale of The Mailbox is of huge significance for the city, firmly cementing Birmingham’s position as a city of international worth. As a building of such high net worth, we have already begun tentative talks with a number of parties and expect a sale to be completed quickly.”
Northern Ireland’s Armagh had largest hike in property prices
Armagh in Northern Ireland had the largest hike in property prices per square metre, according to a study by Halifax Estate Agents.
Prices per square metre surged from £970 in 2005 to £1,355 in 2007. Over the last decade, the value per square metre has risen by 231%. Newry has also experienced a 39% growth in the last year, with a 217% rise over the decade. Prices in Belfast have also surged by 36% in the last year, as well as going up 229% over the last 10-year period.
Property prices per square metre rose in Lisburn by 34% over the year, with a 193% rise between 1996 and 2006. Prices also mounted in Londonderry by 28% over the last year with a 176% increase over the last decade.
Martin Ellis, chief economist at the Halifax, said: “Armagh in Northern Ireland is among the cities with the lowest price per square metre, but it has experienced the sixth-largest increase on the price rise list for UK cities over the last decade.”
Gross mortgage lending reached record high of £1.3bn in March
According to the Council of Mortgage Lenders, gross mortgage lending reached a March record of £1.3bn.
This had increased by 22% from February’s lending figure of £25.5bn and 10% higher than the £28.3bn of lending reached in March last year.
Michael Coogan, CML director general, said: “It is clear that many borrowers are taking sensible steps to shelter against higher mortgage costs. There is still a question mark over just how strong mortgage lending will be over the coming months as the prospect of higher interest rates takes its toll on demand. But, we continue to expect mortgage lending to reach a record £360bn this year.”
33% of new home owners unprepared for unforeseen expenses
According to new research from Yorkshire Bank Mortgages, 33% of new home owners are unprepared for outgoing expenses in their first year of moving into a new property.
Almost one in two (44%) forget to factor in legal fees, stamp duty and the cost of having the property surveyed. Fewer than one in ten (8%) put money aside for moving costs. Within the first year, one in three homeowners (32%) have had to replace or repair a broken cooker and one in eight (14%) have faced even larger bills. In addition, one in ten women became pregnant soon after moving into their new home, according to Yorkshire Bank’s study, leading to further unforeseen expenses!
“It is too easy to quickly move onto thoughts of redecorating and building a new conservatory as soon as the offer is accepted, failing to factor in all the costs of a new home”, said Gary Lumby, head of retail at Yorkshire Bank. “Overlooking costs such as surveys and stamp duty is asking for trouble when, as our survey suggests, there are likely to be less predictable expenses as well.”
£300m construction work in flow at Elephant and Castle
Over £300m worth of construction work has began in Elephant and Castle, London.
Work has started on the demolition of Castle House. The scheme will be Multiplex’s first UK development following the completion of Wembley Stadium, and will consist of 407 new apartments in a 43-storey tower. Hamiltons is the designer.
Work is also underway on 200 residential apartments at O-Central, and construction work has already started on Oakmayne Plaza, a new residential and retail scheme, on the site of the former Volvo garage on New Kent Road.
An exhibition of plans by Richard Rogers Architects of the proposed residential scheme on the site of the London Park Hotel has also recently been displayed. This scheme comprises of 470 new homes including a range of flats earmarked for key workers. The building has also been designed to provide a new home for the Southwark Playhouse, which is relocating from its former premises in Southwark Bridge Road.
£509m facelift for London Victoria
London Victoria will receive a £509m facelift.
The six-year program will start at Victoria Station in 2009 and will include increasing the size of the station by 50% with a new ticket hall, lifts and escalators. London Underground has appointed Mott MacDonald to be lead consultant.
Used by over 75m passengers each year, Victoria Station suffers from severe congestion in the morning rush hour, which means that it is impossible for the station to close while the work is carried out.
Mayor of London, Ken Livingstone, said: “The £509m redevelopment of Victoria Station is a great example of the huge investment being made to improve the Tube and transport across the Capital.
“This expansion is essential to meet London's continued growth and development and to support the extra capacity on the Victoria line, due to be delivered by new trains and signaling system in 2013.”
Brighton property prices increased by 280% since 1996
According to Halifax Estate Agents, properties in Brighton have experienced the largest gain in prices per square metre over the last ten years when compared to other cities.
The price has increased by 280% since 1996 and now boasts an average price of £2,559sqm. Truro in Cornwall has the second largest gain of 270%, followed by London at 245%. However, London is still the most expensive city in which to buy property, with an average price of £3,883sqm in 2006. This is a 14% increase on the previous year’s figure of £3,395.
Interestingly, ten years ago, St Albans was the most expensive city to buy property costing £1,436sqm, compared with £1,097sqm for London. Now St Albans is ranked third with an average price of £2,903sqm, behind Oxford at £3,010sqm.
Martin Ellis, chief economist at Halifax, said: “Over the past ten years Brighton has seen the fastest increase in price per square metre, with a gain of 280%. Properties in the city now cost £2,559 per square metre, compared with £673 ten years ago.”
Highest number of trades ever reported, says the IPF
The property derivatives market had the highest number of trades ever reported in one three-month period, says the Investment Property Databank and Investment Property Forum.
In the first quarter of 2007, 125 transactions took place totaling £2.9bn. At the end of Q1, the total outstanding cumulative value of commercial property derivative trades stood at £6.5bn coming from 407 deals.
“The £2.9bn traded on derivatives in the first three months of this year equates to about 10% of the total IPD record of direct property investment trading in the UK throughout 2006, itself the second busiest year on record. With four banks also now reporting trades on IPD’s French index, the emerging derivatives market is really finding its feet”, said Ian Cullen, IPD’s co-founding director.
