UK home prices: More signs of market easing…

British house prices rose at the slowest pace in August, according to a survey on Thursday that suggested speculation about higher interest rates has dampened buyer confidence.

The Royal Institution of Chartered Surveyors’ monthly house price balance fell to +40 last month, its lowest level since last August, and falling short of forecasts for +47 in a Reuters poll of economists. July was revised down slightly to +48.

Agreed sales fell for the first time since September 2012 and there was a second consecutive fall in buyer inquiries.

“Some of the momentum has come out of the housing market of late reflecting in part concerns over a likely rise in teh cost of borrowing at some point in the not too distant future,” said Simon Rubinsohn, chief economist at RICS.

Bank of England governor Mark Carney said on Tuesday that the bank may start to raise interest rates next spring if the labour market continued to recover from the financial crisis.

The RICS survey of chartered surveyors added to evidence that London’s housing market is cooling off after fervent price growth earlier this year. The London house price balance eased to +9 in August from +11.

Mr Rubinsohn said: “There are signs that the Londonmarket is gradually moving on to a more sustainable footing with a modest increase in the number of instructions coming through slowly helping to create a better balance with demand, and in the process, taking the edge off price gains.”

Britain‘s biggest house-builder Barratt Developments on Wednesday predicted a return to “more normal” trends in Britain’s housing market.

Source: Reuters

Yet another sign of easing in the British property market but then again, one has to take such survey with a slight pinch of salt as depending on who does it and how it is done, the results can most always be subjected to interpretations.
 

However, the fact remains that the amount of new housing stock is currently rising at a much faster pace compared to say, 2 years ago. This is especially within the prime areas around London. Market analysts have estimated that 48% of the nearly 23,000 new homes priced at more than GBP1,000psf are located in the six key clusters along the River Thames. And some 13,000 units could enter the rental market over the next few years. 
 

But with a combination of increasing number of new homes coming onto the market, increasing sound bites about upward revision of interest rates and the implementation of capital gains tax come April 2015, these are certainly factors that potential investors (especially overseas) should take into consideration before putting ink to paper on that investment property in London…

 

 

 

The London Collection

The wife and I were invited to a cocktail reception earlier in the week organized by Savills to showcase The London Collection – a portfolio of three luxury residential properties developed by Ronson Capital Partners. 

 

The London Collectionconsists of the following projects:

 

1.   Riverwalk

Located on the North Bank of the Thames in Westminster, Riverwalkoffers spectacular views over the river and London. This 999-year leasehold project consists of 113 apartments spread across two organically shaped buildings that have been designed to echo the curvature of the river. Riverwalk offers units of one- to four-bedroom as well as penthouses. It is scheduled to TOP in autumn of 2015.

Asking price for a 681sqft, one-bedder is GBP1.40 million (GPB2,056psf) while a 934sqft, two-bedder goes for GBP1.82 million (GBP1,948psf).

 

2.   Chiltern Place

Located at Chiltern Street, which is often doubted “the coolest street in London” as it combines the historic beauty of Londonwith the best of contemporary retail and culture, Chiltern Place is a 16-storey luxury private residential tower consisting of 55 apartments. The 999-year leasehold project is scheduled to TOP in Q3 of 2017 and offers units of one- to 4-bedroom and penthouses. 

We do not have the asking price for the one-bedder (either all 8 of them are totally sold out or yet to be released) but the smallest 2-bedder of 1,137sqft on offer costs GBP3,600,000 (GBP3,166psf)!

 

3.  The Heron

Completed in 2013, The Heron is the tallest apartment tower to be built in London Citysince 1976. Centrally located at the Square Mile, the 36-storey tower offers a panoramic view of the Londonskyline. The 190-year leasehold project consists of 285 units offering 2- and 3-bedroom apartments as well as penthouses.  

The showcase for the evening only featured the “Penthouse Collection”- these are the bigger units located on the 31st – 35th floor of the building. Each apartment is over 2,000sqft and costs between GBP3.75 – 4.95 million. The 2 penthouses are 4,343sqft (3-bedder) and 6,775sqft (4-bedder) respectively with prices only available “on application”. 

Out of the 13 apartments within the “Penthouse Collection”, 8 of them have already been sold. And if it’s any consolation, the price will include 1 parking space within the building.

 

 

The event was another “education opportunity” for the wife and I:   Other than reaffirming the fact that we will not be able to afford anything within London Cityitself (not in this lifetime anyway), it also reinforces the notion that location is paramount when comes to determining the value of a property. 

And speaking of location, the view at the rooftop bar of The Fulleration Bay Hotel (where the reception was held) was actually quite spectacular, despite this being a rather short building.

 

 

 

 

London property remains hot with Asians

London property is hotter than ever, with Asian investors – especially those from Singaporeand Hong Kong – and increasingly confident British buyers snapping up units, consultants say.

But although prices continue to rise, there does not appear to be a bubble forming.

Average prices in prime Central London have risen 10.09% over the past four quarters to about GBP1.64 million ($3.4 million), property consultancy London Central Portfolio (LCP) said last week.

Long-term growth has averaged 10.5% a year since January 1996.

LCP noted that prime Central London transactions are at their highest level since 2007. There have been 6,546 transactions over the past four quarters, up 19.34% year-on-year.

Prices in Greater London are also on the rise, posting an annual growth rate of 8.53%, which brings average values to about GBP530,000.

Transactions here for London properties are at their highest level since 2007 as well, with 116,551 sales over the past four quarters, up 28% year-on-year.

“People buying now can see the benefit of slightly fringe locations, looking at them for the longer-term prospects,”said Mr Liam Bailey, global head of residential research at Knight Frank.

He added that while it has been a well-established trend for foreigners to buy in London, new buildings in recent years have seen especially strong take-up among Asian investors.

Singapore buyers have long been keen on London property.

“It’s almost like a commodity that people buy and sell… investors here like London as it’s a tested and proven market,” said Ms Doris Tan, head of international residential properties at JLL.

London developments continue to stage launches here because of the high level of interest they garner.

Principal Tower, a 50-storey, 243-unit luxury residential building located in the City of London, was launched on Friday.

The prject is part of Principal Place, a mixed-use development that will feature a 15-storey commercial building and retail outlets as well as a piazza that could become a neighbourhood centre, said W1 Developments.

It is being jointly developed by W1 Developments, Brookfield Office Properties and Concord Pacific.

Principal Tower is being exhibited at the St Regis Singapore hotel. Apartments range from 500sqft for one-bedders to 2,500sqft for three-bedders, for about GBP1,450sqft. Price start at GPB600,000.

As at Friday, more than 30 units had already been sold through pre-sales.

“It’s unusual to have an exclusively residential high-rise building at such a prime address,” said W1 Developments managing director Christopher Murray.

The Landau, a 89-unit luxury building in Fulham, London, was also exhibiting yesterday, at the Regent Singapore hotel. Prices start at GBP915,000 for a one-bedroom apartment.

 

Overall, the pound sterling is likely to remain stable in the short to medium term, and should not strengthen significantly against other currencies during the remainder of teh year, noted Mr Bailey.

“As the major issue in Britainis deflation rather than inflation, the bank is unlikely to raise rates.”

Source: ST

Much has been said and written about the current state of the Londonproperty market and more importantly, whether a bubble is forming (if not already). While many have acknowledged that the bull is running a tad slower these days – prices have fallen for the past 2 consecutive months – home prices in London are currently still hovering at its peak. If long-term price growth for Central London has averaged 10.5% a year since 1996, current prices are already more than 6 times what it was 18 years ago (if our maths are correct)!

So with transactions for both Central and Greater London being at their highest levels since 2007, the much bigger investment quantum needed given that prices are at their peaks and properties being labelled as “a commodity that people buy and sell”, the underlying risk has definitely become greater when come to investing in a Londonhome.   

Having said that, there is always money to be made in any kind of market. Key to this is always the “right” timing of entry and more importantly, exit. While the wife and I do not think that the Londonproperty market will crash anytime soon, we do believe that a bubble is forming slowly but surely. Going forward, it will be increasingly challenging to make money out of this market.

 

This is mainly the reason why we have decided to exit the London market… but not discounting the UK altogether… yet.

 

 

London home prices: Is the bull-run ending?

Home sellers in London cut asking prices by the most in more than 6 years this month, adding to signs that the property market in the British capital is coming off the boil.

London values fell 5.9% from the previous month to an average £552,783 (S$1.1 million), the biggest drop since December 2007, property website Rightmove said yesterday.

Nationally, prices declined 2.9%, an August record.

While property demand usually weakens during the summer, Rightmove said the slump this year was steeper than it expected.

Tougher new mortgage rules introduced by Bank of England (BOE) Governor Mark Carney, as well as anticipation of higher interest rates, are putting pressure on the market after a surge in value raised concerns that a bubble may develop.

“Buyers and sellers are becoming increasingly aware about personal finances, given that the cost of mortgages are going up and regulators are trying to bring availability down,” said Rightmove director Miles Shipside.

“This limits what buyers are willing or able to pay, and helps moderate sellers’ price expectations.”

Some of the biggest price declines in London were recorded in affluent boroughs including Kensington and Chelsea, Camden, Hammersmith and Fulham, according to the report.

“Top-end sellers are very much discretionary ones, so can delay marketing till a more active time of year,” Mr Shipside said.

“That tends to depress property prices more in the higher-priced boroughs, with those that need to sell in summer pricing lower to attract holiday-distracted buyers.”

Mr Bruce Dear, head of real estate at law firm Eversheds, said the main problem in London remains a shortage of housing supply, which has pushed property prices to more than 16 times the average salary.

“Urgent policy measures are required to reduce that gap, ” he said in a statement.

“The only answer is for the government and local authorities to urgently build more.”

Nationally, the annual pace of growth in prices slowed to 5.3% in August from 6.5% in July. The average asking price was £262,401.

Rightmove said the drop in monthly prices is a “lead indicator of a slower market in the second half”.

Out of the 10 regions tracked by Rightmove, all but the north of Englandshowed a decline in home values in August from July.

London led the drop, followed by East Anglia with a 4% drop and the south-east with a 2.5% fall.

Source: Bloomberg

So it looks like the law of gravity for so long defied by the Londonprivate home market appears to be reasserting itself. So are buyers finally going on strike?

According to a report in The Observer (a British newspaper), the mundane answer to that question may be that prospective buyers simply cannot amass the finance to buy for now. The mortgage market review (MMR), imposed by regulators to avoid a repeat of the lax lending and “liar loans” common before the financial crisis, has already curtailed borrowers from taking jumbo-sized mortgages.

And then there are also others who are repelled by fears of interest rate rises.  

However, British households remain heavily indebted, making the BOE deeply hesitant about raising rates. Given that there are no sign of wage rising, and that the Eurozone economy is heading into reverse, the prospect of an early rate rise is receding yet again.

In addition, the fundamentals that have driven the Londonprice spiral – deeply restricted supply, a fast-growing population, cash buyers, investor-landlords and the capital’s role as a safe haven for the global elite’s billions – are still largely in place.

The irony is that the cheerleaders for a price crash want only one thing: to buy. With such a large reservoir of potential buyers, it’s difficult to envisage much more than a pause in prices.  

 

 

 

London property market: Prices fall in July for second month running

Asking prices for London property fell for a second month in July as an increase in the number of homes for sale softened the market for sellers, Rightmove plc said.

Prices sought in the UK capital fell 0.4% from June to an average GBP587,174 (S$1.25 million), the property website operator said in a statement yesterday.

Across Englandand Wales, prices fell 0.8%, their first decline since December.

The UK property market is losing steam, after the Bank of England said it posed the greatest risk to the economic recovery.

Financial stability officials set a cap on loan-to-income ratios last month to prevent surging prices leading to an excessive build-up of debt.

The declines are “a sign of some sellers asking beyond what buyers and lenders judge to be affordable or fair value”,  Miles Shipside, director at Rightmove, said in a statement.

“Market conditions still compare favourably with this time last year, with growth in both the economy and employment, plus a comparative thaw in mortgage availability.”
 

The number of properties offered for sale in Londonis 15% higher this year than the same period in 2013, according to Rightmove. New sellers rose 28% from a year earlier.

The decline in the capital was led by three districts, Islington, Wandsworth and Kingston, each of which fell 3.8% on the month.

Nationally, of the 10 regions tracked by Rightmove, seven posted declines. These were led by 1.9% falls in the East Midlands and the North.

Rightmove yesterday refined its forecast for 2014 house price growth to 8% from a previous prediction of 6 – 8%.

A stronger pound may also be deterring foreign buyers by making UK assets more expensive, Rightmove said.

The UK currency reached US$1.7192 on July 15, the highest since October 2008.

That point was echoed last week by Deutsche Bank economist George Buckley, who said the gains in Sterling along with global economic weakness and the withdrawal of BOE stimulus may sap demand for homes in the capital.

“There seem to be more downside than upside risks to Londonhousing going forward,” Mr Buckley said.

“While we do not expect a crash in Londonproperty prices, we do expect price pressures to ease going forward and would not be surprised to see outright falls in asking prices.”- Bloomberg.

Info source: BT

The wife and I were kinda glad that we decided to exit the Londonmarket during the early part of this year, immediately upon the TOP of our property. It is still very much the norm that UK home buyers prefer to buy properties that are ready for occupation. Our original intention was to “hold and rent” but after seeing the deluge of private homes that were coming onto the market over the past year, we reckon that it may take a longer than expected time to rent the place out, especially if we insist on a certain level of rental yield.

Although investment in Londonproperties may not seem to be as attractive now, it may not be a reflection on the state of affairs for the whole UK.  If one bothers to look north of the border (i.e. Scotland), there are still some decent opportunities to be found. As one prominent Scottish property consultant commented on their latest price report for June 2014,  “The improvement in market activity (in East Central Scotland, which include Edinburgh) in 2013 has continued into 2014 with a notable rise in the number of homes being bought and sold. Conditions are more favorable for sellers, with more homes achieving Home Report valuation and selling times shortening. We’ve also seen a continued rise in the popularity of the Offers Over approach to selling a home, with roughly two-thirds of homes coming onto the market being advertised in this way.

“Whilst the market has improved it’s worth putting the growth we’ve seen in perspective. The number of sales we’re seeing is still around 25% lower than at the peak of the market and the rate of house price inflation in most areas in moderate, especially when compared to the rapid rises being observed in some areas south of the border.”

 

 

 

London property: So is sub-sale allowed?

When the wife and I posted our “So you are looking to buy an UK property” piece on June 7, we created some confusion over the issue of sub-sale, i.e. selling the property to another party before completion. We had said that sub-sale is prohibited but it turned out that one of our readers had actually bought a London property thru a sub-sale.

We finally managed to retrieve the legal documents we had received from our UK solicitors for the Camden property that we used to own. On closer inspection, we realized that we were wrong (yes, we do admit our mistakes) BUT maybe not entirely so.

 

In the Singapore context when a sub-sale is concluded, all rights and obligations of the property is transferred to the new buyer. So in the event that the new buyer defaults, the liability falls solely on the new buyer. In another words, whatever happens after the sub-sale of your property is concluded has nothing to do with you.

 

But in the case of a London property, you can only assign the contract to a new buyer when you “sub-sale” your property. You remain liable even if the sub-sale process is concluded, i.e. should the new buyer defaults, the developer has legal rights to go after you to complete the purchase of the said property. In addition, the developer will continue to deal only with you (and not the new owner). So you effectively become the go-between of the developer and the new owner until legal completion.

 

In summary, one can actually do a sub-sale on a London property. But the developer will still go after the ORIGINAL buyer should the deal goes belly-up subsequently.

 

And the wife and I will definitely be more careful with our facts going forward….

 

 

 

 

 

 

London housing market running out of steam?

Bloomberg has reported that asking prices for London homes fell from a record this month in a sign that buyer concern about overpaying is prompting them to step back from the market. This is according to Rightmove Plc, a property website operator.

Values in Londonslipped 0.5% to an average of GBP589,77, the first decline this year. Prices in Kensington and Chelsea, Britain’s most expensive district, fell 0.3% to GPB2.38 million. Across the UK, they rose 0.1%, a less-than-average increase for this time of year.

Only a third of London’s 32 boroughs saw asking prices rise this month. The largest increase was in Westminister, the second-most expensive district, where values climbed 3.5%. Prices in Haringey, north London, plunged 4.8%.

UK home prices have surged in the past year amid near record-low borrowing costs and a strengthening economic recovery. In London, values got an extra boost from cash-rich foreign investors seeking a haven. Rightmove’s report showed that UK house prices have risen 7.7% in the past year, with London up 14.5%.

Rightmove’s director has cited this month’s price decline in London as “an example to the rest of the country of what happens when affordability and common sense get stretched too far”. But if our Singapore experience is anything to go by, one swallow does not a summer make. Or in the property sense, one month of price decline does not a cooling London market make. So we shall see…

Investment home in London, anyone?

In the spirit of the Olympics that is happening in the UK right now,  the wife and I deem it fitting to talk about private property purchase in the land of our former colonial masters.

Given the number of new restrictions imposed on property buyers in Singapore, we have recently turned our attention to properties further ashore. One city that caught our eye is London.

Investing in Londonproperty is nothing new to many Singaporean –  it has been one of the more popular location for buying foreign homes in the past years. However, there seemed to be more aggressive marketing of UKhomes in our local newspapers these days (just flip through The Straits/Sunday Times this weekend to see what we mean) and many more property exhibitions in Singapore that the wife and I can ever recall.

We attended one such exhibition and these are some noteworthy facts that we picked up:

·       Prices of apartment especially within and around central Londonhave increased substantially – you can expect to pay about 900 pounds per sq foot, going up to  1,300 – 1,400 pounds per sq foot for more “sought after” projects. (* Caveat – this is based on information we got, which we cannot claim 100% accuracy. So do correct us if you know better *)

·       Many more of these new projects are 999-year leasehold.

·       You do not have to worry about ABSD or SSD and there is no withholding tax on sale of your property if you are not a UKresident.

·       Most new projects only require a 10% down-payment, with the balance 90% payable only upon completion.

·       Unlike Singapore whereby stamp duty is payable whenever an apartment changes hands, you only pay stamp duty upon project completion – this means you save on paying money to the UK Government should you decide to do a sub-sale.

·       Some of these new projects offer nett rental returns of 6% and up to 3 years of rental guarantee – not bad compared to the measly 3 to 4% that you struggle to get for rental income in Singapore

·       There are no PES, bay-window or planter box in most of these apartments and even if they exist, these do not constitute as part of your overall living area. And to add icing to the cake, the balcony space does not form part of your living area either!

·       Most of the new projects are unlike the mega ones you find in Singapore(i.e. in excess of 400 units). Here you typically find developments with less than 100 units. As such, certain unit type in these projects are rather exclusive as they are limited in number within the development. For example, there are only two 2-bedder units at Regent Canalside located in Camden Town (refer to enclosed brochure for details of this project) whereby the living room and all bedrooms get a view of the Camden Canal.

Click on link below to view brochure of Regent Canalside:
http://www.scribd.com/doc/101408024/Regent-Canalside-Brochure#fullscreen

Incidentally, The Sunday Times today has featured an article about rejuvenation of the Olympic Park area in East London. And according to analysts, demand for properties in London has been and will continue to stay strong.

So check out one of them UK property exhibition if you have some free time today and have a great week ahead!

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