48% increase in tenants looking for property to rent in Q1 2010

67% of commercial property investors looking to buy

Construction of private sector housing is on the up

HIPs are the first thing to go if Tories win

Huddersfield waterfront regeneration projects starts

There was a record number (48,332) of new tenants registering for rental accommodation in the first quarter of 2010, according to Countrywide.

Registrations increased by +48% in Q1 2010 over Q4 2009 and rose +36% compared to Q1 2009, giving the highest number of new tenant registrations since Countrywide started keeping records.

John Hards, co-managing director at Countrywide Residential Lettings, said: “Demand for rental properties has rocketed over the last few months and the shortage of properties is pushing up demand across the country as house hunters continue to struggle to get on the property ladder. I suspect this will continue while people wait to see how the impending election affects the property market.

“Buy-to-let landlords are using this as an opportunity to increase their property portfolios as rental yields improve in key locations, which is helping with the severe shortage of supply in many locations.”

There was an average of 4.9 tenants vying for every property compared to 2.9 tenants in January 2010. The south east has the biggest shortage of rental properties with 6.8 tenants vying for each property, with two-bedroom properties most in demand. In the south west a severe lack of supply of two bedrooms has pushed up demand with 10.5 tenants after each property.

Family homes are the most sought after in the East Midlands with 38% of prospective tenants looking for 3 bedroom properties, an increase of +16.5% since January 2010. In the West Midlands over 35 percent of prospective tenants were looking for three bedroom properties, an increase of +9% since Q4 2009. Three bedroom properties are most in demand in the North West with an average of 3.6 tenants vying for each property.

These issues have resulted in the property register of letting agents falling as demand outstrips supply. A property is now only on an agent’s book for an average of 17 days, a decrease of three days since Q4 2009. Rising demand and the lack of supply has led to an increase in rental prices with the UK average monthly rate up +2.5% to £683pcm.

67% of commercial property investors looking to buy

There is a renewed sense of vigour amongst commercial property investors as 67% are looking to purchase commercial property in 2010 and 2011, according to Savills.

It has also noted a decrease in the number of ‘hold’ buyers and that these buyers are set to become more acquisitive over the next two years.

Simon Parker, head of commercial auctions at Savills, said: “This change in sentiment from investors is definitely an encouraging sign for the market and represents the renewed investor confidence. It is also very interesting as 16% of buyers predicted further falls in 2010 and while judging the bottom of the market is crystal ball gazing, these cautious respondents must be fairly confident of a bounce back in 2011 if they are looking to buy now.”

The south east of England appears to be the most popular location for investors in the next 12 months as 52% are looking to purchase in the region. The retail sector did not dominate buyers’ appetite as Savills recorded interest for a wide range sectors from healthcare to offices and industrial.

With regards to buying strategy, the most important rationale for investing is income return, reflecting the importance of security. Due to a limited debt market, the majority of buyers are cash rich, so are seeking better returns and security than they will get from bank saving rates and other forms of investment. Lease length, as a result, remains crucial with respondents who are mainly interested in high street shops and healthcare properties placing it in the ‘vital’ category, according to Savills.

Parker said: “There are two definite buyer categories currently in the market, both cash rich, but the first and largest has a defensive strategy looking for secure income where increases in asset values are less important. The other is the entrepreneurial investor looking to acquire high risk properties at a discount price, aggressively asset manage to maximise value and look to trade on in the future. The auction market can accommodate both types of buyer as the properties and prices they seek are very different.”

Construction of private sector housing is on the up

Residential construction projects that started during Q1 2010 saw an increase in value of +37% compared to Q1 2009, according to Glenigan, as there was a rise in project starts for both the private and social housing sectors.

Allan Wilen, economics director for Glenigan, said: “Many projects stalled by the bad weather in January and February have now started. House-builder confidence has been boosted by rising house prices and property transactions seen since last summer. This recent improvement is encouraging and gradual strengthening in private residential construction is forecast for the coming months.

“While private sector projects are forecast to improve over the course of 2010, Government cuts will further restrict the flow of public sector schemes over the medium term. Conditions in the industrial and commercial property markets have moved off the low point reached in the first half of 2009 and project starts in these sectors are forecast to gradually improve in the second half of the year.”

Public sector project starts began to lose momentum and decline in April 2009 and the impending general election will exacerbate the fall. Whilst the value of non-residential construction project starts over the quarter were only -2% lower than the same period in 2009.

Wilen said: “An increase in retail, hotel and Olympic-related projects has helped offset the continued weakness of the private industrial and commercial sectors and a recent slowing in public sector projects.”

HIPs are the first thing to go if Tories win

A Conservative party win would see Home Information Packs (HIPs) withdrawn as there is wide agreement amongst property professionals that HIPs have not benefited buyers or sellers, according to Savills Research.

It stated that they have contributed to a lack of fluidity in the market, with sellers unable to test the market without first commissioning, and incurring the cost of, a HIP.

Yolande Barnes, head of residential research at Savills, said: “There have been booms and busts under all administrations and the residential market has nothing to fear from an election per se. However, the success of the winning party’s economic and fiscal policies, and the resulting strength of the economy is, of course, liable to have a significant effect on the residential market.”

The Liberal Democrats would introduce a mansion tax on properties over £2m, so any home worth over £2m would be liable for a 1% levy on the excess value over the £2m threshold, so on a £5m home it would be £30,000.

Lindsay Cuthill, head of Savills south west London, said: “Our view is that any tax banding creates artificial thresholds in the market. This proposal could suppress values around the £2m mark and its effect would be particularly felt in London and the South East. Such a tax would be extremely difficult to implement and the cost of valuing all affected properties (estimated to be around 80,000) would be exorbitant.”

Huddersfield waterfront regeneration projects starts

Construction has started on the new £73m Kirklees College in Huddersfield, which forms part of the Huddersfield Waterfront Quarter Regeneration Scheme, and is due to open in September 2012.

The waterfront scheme is predicted to create up to 2,000 new jobs and includes 190,000 sq ft of office space, 300 new homes, leisure facilities and restaurants with a new public square on a six-acre site near the town centre. Development plots for offices and leisure use will be available from summer 2011.

Paul Barber, chief executive of Strategic Sites, said: "The Waterfront Quarter is one of the few major regeneration projects to proceed in the current climate. As well as bringing huge benefits to Huddersfield and West Yorkshire in general, the project also marks a shift by Strategic Sites into the role of development management, a natural extension of our traditional role as a developer."

The project will also enable access to the Huddersfield Narrow Canal which currently runs under the site, to create a waterway which will also serve to provide cooling water for the college building.

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