According to Knight Frank, Aberdeen’s prime office rents have increased the most in the last six months, beating Central London, Birmingham and Manchester.
Aberdeen ’s prime rents have increased by almost 12% to £24 sq ft compared with £21.50 sq ft in Q1 07. The city has knocked the traditionally expensive boroughs of the West End and the City in Central London off the top spot as prime office rates in London have witnessed an increase of 10% for both areas.
Since Q1, prime rents in Glasgow increased by 6% to £27.50 sq ft. The research also highlights Edinburgh which has experienced further growth as prime rents have also risen by almost 4% to £28.50 from £27.50 in Q1.
Katherine Monro, partner of Knight Frank in Aberdeen, said: “The Aberdeen market has performed exceptionally well this year, and a lack of high quality Grade A stock has continued to drive rents in the city. We have witnessed a steady rise in office rates throughout 2007, and as demand continues to outstrip supply this trend looks set to continue in the near future.”
Irish commercial property returns accelerated
According to the Investment Property Database (IPD), Irish commercial property returns accelerated to 3.3% between July and September as UK returns from the sector fell to their lowest level for 15 years. Commercial property returns in the Republic rose from 3% in Q2 2007, taking 12-month growth to 15.2%, while UK returns fell to -1.2% in September.
Irish property has historically been closely aligned with the UK, according to Angela Sheahan, IPD’s research manager, but appeared to have diverged as the British market fell.
She said: “There is a potentially similar situation; property prices are arguably overpriced, but the fact that Ireland is a much smaller market means that there is not so much supply. Fallout from the UK market would be the only reason for a slowdown, but I wouldn’t be surprised if they continued to be robust.”
Offices offered the best returns over the quarter with 4.2%, industrials offered 2.7%, followed by retail on 2.6%.
AHIPP replies to RICS
The Royal Institute of Chartered Surveyors (RICS) has said that Home Information Packs (HIPs) will push first-time buyers out of the market.
Paul Broadhead, deputy director general of the Association of Home Information Pack Providers (AHIPP), said: “The latest HIPs allegations from RICS appear to have disregarded the many benefits that the packs will offer first-time buyers. With more information upfront and the costs incurred in gathering and providing information such as searches transferred to the seller, first time buyers will find their first step onto the housing ladder a more affordable and informed one.
“What RICS appears to have forgotten is that first-time buyers stand to benefit the most from the introduction of HIPs. With the vendor responsible for acquiring the HIP, costs will be eliminated and buyers will be able to make a more informed decision from the offset.”
Landlords’ yields and overall returns to rise thanks to immigration
The proportion of landlords who rent their properties to immigrants from EU countries is continuing to soar, totalling 28% in September, according to figures from Mortgage Trust.
The number of landlords which let to the immigration market has risen substantially from 4.6% in September 2006 and from 17% in May 2007. Tenant demand for private rented accommodation is strong, with the influx of people from EU accession states such as Poland and the Czech Republic being a major contributory factor.
According to figures from the Department for Work and Pensions (DWP), East Anglia has the highest number of registered immigrant workers, followed by the West Midlands, London and the North East. Year-on-year rental increases for these areas are 11.5%, 16.2%, 19.3%and 14.4% respectively.
Mortgage Trust's findings coincide with the Office for National Statistics raising its immigration projections. Official estimates are for a long-term net migration inflow of +190,000 each year, up from +145,000 in the previous projections.
John Heron, Mortgage Trust managing director, said: “As competition for rented homes grows, not just from migrants, but from students and young professionals too, we can expect landlords' yields and overall returns to rise.”
Flat-line in the housing market, but no crash says Heritable Bank
Heritable Bank's chief executive, Mark Sismey-Durrant, has warned of tough times ahead for those involved in property development finance.
Sismey-Durrant said that up until now property had been 'a one-way bet' but the mortgage finance bonanza has now come to an end.
He said people should remember that property is all about boom or bust: "We have seen significant changes to the financial services landscape with the sub-prime market collapsing in the US and redundancies in some of the world’s largest banks. There are also the unintended consequences of Northern Rock.”
He pointed out the three main areas of risk in property development finance - cost, time and market conditions and said that developers were selling on properties in a very different market from that in which they bought them.
"There will be a reduction in the price that developers get for their end product and funding will be more difficult. Lending criteria will be tightened and debt will be more expensive”, he said.
Sismey-Durrant predicted that difficulties in the property development market would be mainly in city centre flats, some of which have been subject to fraud, high-value London properties, and secondary and tertiary properties.
“Planning will remain extremely difficult - it will be more difficult for developers to make money and more difficult for poor developers to stay in business as we go through testing times. The market will flat-line but there will not be a crash. The Government says it will build three million new homes by 2020 and increase the amount of affordable housing available. But Gordon Brown’s numbers are pie in the sky”, he said.
On predictions for the housing market, Capital Economics had predicted a downturn of 3% next year and again in 2009. The Council of Mortgage Lenders (CML) was more optimistic predicting prices would rise by 1%. Estate agents Knight Frank and King Sturge predicted rises of 3% and 7% respectively while Bovis expected the prices of new homes to fall by 3%.
Fastest decline in sentiment since July 2005
The Royal Institute of Chartered Surveyors (RICS) have reported that house price growth remained negative for the third month in succession. Around 22% more chartered surveyors reported a fall rather than a rise in house prices, compared to 14.9% in September, which is the fastest decline in sentiment since July 2005 when 30.9% reported a fall than a rise.
In addition, new instructions also declined for the fifth consecutive month; 17% more chartered surveyors reported fall rather than a rise in new instructions to sell property. The supply side of the market remains tight and continues to provide some support. Interest rate rises and the tightening of lending conditions have all had an impact upon demand.
New buyer enquiries also declined for the 11 th consecutive month with 41% more chartered surveyors reporting a fall than a rise. Weak demand has pushed the stock of unsold property up at the highest pace since May 2003, with unsold property per surveyor rising to 64.9% compared to 59.7% in September.
Ian Perry, RICS spokesman, said: “Credit market turmoil has yet to put downward pressure on prices in the capital although prices have now stabilised even here. Significantly, London is the only region where new instructions have risen over the last two months indicating that more leveraged buyers at the margins may already be feeling the credit squeeze.”
Private investor sentiment remains strong in commercial property
According to Jones Lang LaSalle, private investors continue to invest and represent a crucial component in the commercial property market despite the credit crunch.
The report has been published highlighting the significance of the private investor in the commercial property market and follows a three month analysis of the behavioural patterns of private investors also known as High Net Worth Individuals (HNWI) in UK property auction rooms over the last ten years.
With two thirds of property sold at commercial auction classified as retail, the report also highlights that this established group of investors are concentrating on UK High Street properties for the greatest returns. Banks and blue chip properties are shown as being the most attractive investments due to a surge in sale and lease-back deals and quality assets being more readily available.
Richard Auterac, director and auctioneer at Jones Lang LaSalle, said: “This new report highlights the importance of the private investor in the commercial property industry. Even though recent turbulence in the credit market has caused concern amongst institutional investors involved in equities, our research has identified that private investor sentiment remains strong as commercial property continues to outperform all other asset classes.”
Eurostar at St Pancras is open for business
On 14 th November, after 11 years of construction, a new British high speed rail link and Eurostar terminal opened for business, St Pancras.
It’s Britain’s largest rail investment to date, costing £5.9bn and will operate trains from London to Paris and Brussels. Eurostar, which operates the trains, said journey times will be cut by an average of 25 minutes.
The Eurostar will no longer run from Waterloo International and will run on a new 25-mile section of track called High Speed 1. The trains will pass through new stations at Stratford and Ebbsfleet at 186mph. The journey from London to Paris will now take just over two hours, and London to Brussels will take 1hr 41mins. On average, there will be 17 trains each day from London to Paris.
The station has 15 platforms, six for international journeys via Ebbsfleet International and the existing station at Ashford International, and three for the new high-speed domestic services to and from Kent due to start in December 2009. In 2009, with the launch of high-speed domestic services, London will only be 17 minutes away from Ebbsfleet and travelling further afield, journeys to Nottingham will take just over two hours and to get to York will take 2hrs 52 mins.
The development around Ebbsfleet International by Land Securities means Ebbsfleet Valley will be transformed into a mixed-use community of homes, offices and leisure facilities. Other developments already up and running include a new residential and business community near Dartford called The Bridge, and new housing projects in Gravesend, Greenhithe and near Bluewater.
Decline in gross lending in September
Higher borrowing costs contributed to a decline in gross lending in September, with the bulk of the impact being felt on lending for house purchase rather than re-mortgaging, according to the Council of Mortgage Lenders (CML).
September’s lending total of £30.6bn was lower than August’s £34bn, but higher than a year ago (£29.2bn in September 2006). At £12.7bn, house purchase borrowing was lower than in both the preceding month (£16.2bn) and in September 2006 (£13.9bn).
But re-mortgaging and other lending remained buoyant in September. At £11.1bn, re-mortgaging was higher than in August (£11bn) and in September 2006 (£10bn).
The average mortgage rate in September was 6.02%, compared with 5.91% in August. As a result, affordability worsened for first-time buyers and movers. Mortgage interest payments consumed 20.4% of income for first-time buyers and 17.5% for movers. Borrowing by both groups declined in September. There were 28,400 loans to first-time buyers, worth £3.8bn (compared with 34,800, worth £4.7bn, in August). And movers took out 52,400 loans, worth £8.9bn (compared with 68,000, worth £11.5bn, in August).
Real estate deals are delayed thanks to credit crunch
The £1bn purchase of Britain’s second tallest tower, 25 Canada Square, in London’s Canary Wharf remains uncompleted after four months it was agreed.
The Royal Bank of Scotland (RBS) agreed in July to sell the headquarters of Citigroup to a consortium of investors including financier Derek Quinlan and private property group Propinvest.
RBS bought the building and its neighbour, 5 Canada Square which sold in July for £453m, for £1bn in December 2003. But should the transaction fail, it would be one of a string of property deals to flounder in recent weeks, which could be a sign of how the credit squeeze has affected the real estate market.
Last month saw an Aim-listed property company, Delek Global Real Estate, withdraw from the £1.4bn purchase of a portfolio of 88 buildings owned by Jelmoli, a Swiss retailer.
