A dramatic turnaround in the European commercial property market is already leading to fears of overheating in some cities.
Fund houses such as Hermes and Threadneedle are implementing measures to stagger inflows after attracting a flood of money, even as other investment managers are only now scrapping the redemption restrictions they imposed at the height of the financial crisis.
And in spite of UK commercial property prices plunging 45% from the peak, there are concerns that top-end property, particularly in central London and Paris, may already be fully valued.
"There is a bit of a goldrush mentality. We are getting very close to deals not being good value in the London prime sector any more and very close to it in Paris," said Matthew Richardson, head of European real estate research at Fidelity International.
Yields on prime London property, which move inversely to prices, have already fallen from about 6.8 % to as low as 5.5%. "The pace and extent of this yield snap is unprecedented. It's not sustainable," said Keith Sutton, director of European real estate at Fidelity. "As a short-term play it's kind of over in prime London and Paris now."
Other managers also have concerns. Chris Mathew, Fund Director of the Hermes Property unit trust, warned of a "clear disconnect between the strengthening investment market and the occupier markets, where rental values are still generally falling and voidsrising".
Chris Morrogh, fund manager and director at Threadneedle Property Investments, added: "Central London is surprisingly expensive. Given the difficulties in the financial sector we would expect to be getting quite attractive pricing in that market, but we are not."
Fiona Rowley, manager of the M&G Property Portfolio, said she was "avoiding" West End London offices because of tumbling yields.
Market sentiment gathered steam in the summer as data suggested both European property markets and the global economy bottomed out.
Miles O'Connor, head of UK institutional business at Schroders, said the group had participated in 22 searches from large investors since July, compared with just two in the first six months of the year. "There has been a huge amount of interest from corporate and local government pension schemes," he said.
Industry figures argue the wider property market is still attractive, with the yield spread between prime and secondary property, as measured by the Investment Property Databank, having trebled since March 2008. "Generally we think it's a good time to be coming back into the market. Anything that is not prime is off the radar screen," said Sutton, who said yields of 7 to 9% were widely available in the secondary market.
The rapid bounce-back in prime markets is partly attributed to this being the first property market recovery to occur in an era of globalised, crossborder real estate investment, rather than the smaller, fragmented domestic markets that dominated as recently as the 1990s.
Overseas investors are said to have been particularly attracted to the UKCIG market by the weakness of sterling.
In addition property yields look attractive compared to the meagre nominal returns available from gilts, while the pipeline of new developments is at historically low levels.
UKCIG Investment News, November 2009
Sunday, November 22, 2009
Wednesday, November 18, 2009
JP Morgan needs creative thinking to fold in Caz - UKCIG
The US bank is nearing a deal to buy out its UKCIG investment banking partner from their 50-50 joint venture hatched five years ago. But the mooted £1bn price tag – 10 times more than JPMorgan’s initial £100m investment – is far from cheap. Before JP Morgan signs, it needs to be clear it can grow the business while preserving the best aspects of the status quo.
Cazenove’s 1,500 shareholders have more than just a looming UK tax hike as a reason to sell now. The firm’s bumper year in equity issuance provides a strong incentive. Cazenove’s share of the joint venture generated earnings of about £48.5m in 2008. Assume a 50pc uplift this year and JP Morgan would be paying 13 times current-year earnings at the £998m price tag – a rich multiple for any investment bank.
The conventional way to make a pricey deal pay off is to rip out overlapping people and infrastructure. But this is no conventional deal. The joint venture has been a success in large part because Cazenove was able to retain its independent culture. Moreover, duplication is limited. JP Morgan effectively outsourced its UKCIG investment banking business to the JV. The main duplications are in cash equities, which was never integrated because Cazenove’s margins were so much higher.
JP Morgan will need to proceed carefully - as it has done throughout the history of the joint venture. There will be temptation simply to move the best bankers over and shut down the existing Cazenove operation. But killing the Cazenove culture could cut more profit than cost. Equity trading clients might defect, mourning the loss of an independent broker. Cazenove’s corporate broking business is another sensitive subject. It relies on trusted relationships. If customers feel like they are dealing with just another a bulge-bracket firm hell-bent on cross-selling, the franchise will quickly erode.
There are ways to integrate Cazenove at arm’s length. Rather than bring the equities business into the fold, it may be better to let it rent JP Morgan’s technology and expertise in areas such as algorithmic trading. And Cazenove could retain a separate office. Whatever the answers, JP Morgan needs to think imaginatively. Perhaps the journey need not end just yet.
UKCIG Investment News, November 2009
Cazenove’s 1,500 shareholders have more than just a looming UK tax hike as a reason to sell now. The firm’s bumper year in equity issuance provides a strong incentive. Cazenove’s share of the joint venture generated earnings of about £48.5m in 2008. Assume a 50pc uplift this year and JP Morgan would be paying 13 times current-year earnings at the £998m price tag – a rich multiple for any investment bank.
The conventional way to make a pricey deal pay off is to rip out overlapping people and infrastructure. But this is no conventional deal. The joint venture has been a success in large part because Cazenove was able to retain its independent culture. Moreover, duplication is limited. JP Morgan effectively outsourced its UKCIG investment banking business to the JV. The main duplications are in cash equities, which was never integrated because Cazenove’s margins were so much higher.
JP Morgan will need to proceed carefully - as it has done throughout the history of the joint venture. There will be temptation simply to move the best bankers over and shut down the existing Cazenove operation. But killing the Cazenove culture could cut more profit than cost. Equity trading clients might defect, mourning the loss of an independent broker. Cazenove’s corporate broking business is another sensitive subject. It relies on trusted relationships. If customers feel like they are dealing with just another a bulge-bracket firm hell-bent on cross-selling, the franchise will quickly erode.
There are ways to integrate Cazenove at arm’s length. Rather than bring the equities business into the fold, it may be better to let it rent JP Morgan’s technology and expertise in areas such as algorithmic trading. And Cazenove could retain a separate office. Whatever the answers, JP Morgan needs to think imaginatively. Perhaps the journey need not end just yet.
UKCIG Investment News, November 2009
JP Morgan 'to take over Cazenove' - UKCIG
US investment bank JP Morgan is fully to take over historic UK stockbroker Cazenove, according to press reports.
JP Morgan is thought likely to pay about £1bn ($1.67bn) for the 50% of Cazenove it does not already own. In 2004, JP Morgan and Cazenove agreed a joint venture in which they merged investment banking operations.
The Financial Times said that Cazenove chairman David Mayhew, who joined the firm 40 years ago, would stay on and was likely to receive a windfall. Under the original agreement, JP Morgan had until February 2010 to exercise an option to buy out its partner.
Cazenove, which traces its roots back to 1819, is widely believed to be the banker to the British royal family.
UKCIG Investment News, November 2009
JP Morgan is thought likely to pay about £1bn ($1.67bn) for the 50% of Cazenove it does not already own. In 2004, JP Morgan and Cazenove agreed a joint venture in which they merged investment banking operations.
The Financial Times said that Cazenove chairman David Mayhew, who joined the firm 40 years ago, would stay on and was likely to receive a windfall. Under the original agreement, JP Morgan had until February 2010 to exercise an option to buy out its partner.
Cazenove, which traces its roots back to 1819, is widely believed to be the banker to the British royal family.
UKCIG Investment News, November 2009
Tuesday, November 17, 2009
UKCIG Investment performance cheers Savills
Estate agent Savills reported strong trading at its UK residential and Asia Pacific businesses but said its European arm continues to face difficult conditions.
The UK residential business has continued to perform strongly since June driven by London and the South East, though Savills remains cautious given the prospect of a general election and increased taxation in the second quarter of 2010.
In the commercial arm, the firm’s UKCIG property investment has been focused on long-lease properties in exclusive areas that are able to rely on demand from occupants from around the world. While there has been minimal investment beyond this area the firm says there are some recent signs that ‘investors are starting to look at the next tier down.’
Hong Kong and China have helped drive business forward in the Asia Pacific region, Savills said.
Overall, continental Europe has seen little investment activity in the commercial property although recently there has been an increase in investor interest in markets such as Paris, Savills said. The Irish business has continued to be adversely affected by the tough economic conditions there.
The UK residential business has continued to perform strongly since June driven by London and the South East, though Savills remains cautious given the prospect of a general election and increased taxation in the second quarter of 2010.
In the commercial arm, the firm’s UKCIG property investment has been focused on long-lease properties in exclusive areas that are able to rely on demand from occupants from around the world. While there has been minimal investment beyond this area the firm says there are some recent signs that ‘investors are starting to look at the next tier down.’
Hong Kong and China have helped drive business forward in the Asia Pacific region, Savills said.
Overall, continental Europe has seen little investment activity in the commercial property although recently there has been an increase in investor interest in markets such as Paris, Savills said. The Irish business has continued to be adversely affected by the tough economic conditions there.
Sunday, November 15, 2009
Sanlam Unit Buys U.K. Investment Manager, Business Report Says - UKCIG Investment
Sanlam International Investment Partners has bought a 29.9 percent stake in U.K. investment manager, Four Capital Partners, for an undisclosed amount, Business Report said.
The company continues to look for opportunities including investment partnerships and acquisitions, Hendrik Pfaff, managing director of SIIP, as it’s known, told the Johannesburg- based daily paper, and expects Four to become one of the largest investment managers in Asia in three to five years.
UKCIG Investment
The company continues to look for opportunities including investment partnerships and acquisitions, Hendrik Pfaff, managing director of SIIP, as it’s known, told the Johannesburg- based daily paper, and expects Four to become one of the largest investment managers in Asia in three to five years.
UKCIG Investment
Friday, November 13, 2009
First time buyers in the UK still struggling to get on property ladder, figures indicate - UKCIG Investment
The UK property market is stable but runs the risk of stagnation because first time buyers are still struggling to secure a mortgage unless they have a deposit of at least 25%, it is claimed.
The latest monthly report from the Council of Mortgage Lenders shows that 51,000 mortgages were agreed for house purchases in September, a rise of just 1,000 compared with August.
Real estate experts are constantly warning that first time buyers are the key to a sustainable recovery in the property market yet these figures show they are still not able to get on the housing ladder in the kind of numbers that are needed.
'Although the recent bounce-back in house purchase activity is holding up, we remain some way below what might be called normal levels of transactions. We have stability in the mortgage market but at the risk of stagnation,' said CML economist Paul Samter.
There are also concerns that the temporary stamp duty holiday that comes to an end in the New Year could affect first time buyers. The figures from the CML show that a third of first time buyers escaped paying stamp duty in September as a result of the government's £175,000 nil-rate threshold.
There were 6,200 first time buyer loans for properties between the old threshold of £125,000 and the temporary threshold of £175,000, representing 32% of the 19,700 loans to first-time buyers in September.
In addition, 7,800 first-time buyers, some 40%, bought properties valued below the £125,000 original threshold.
Since the concession was introduced last September, an estimated 132,500 house purchase mortgage transactions have escaped paying stamp duty which otherwise would have incurred the tax at 1%, some 27% of the 486,400 house purchase loans in the period.
'The stamp duty concession has played a modest role in underpinning confidence in the housing market. As the end date for the stamp duty concession approaches, we may see sustained levels of activity at the lower end of the market in a traditionally quiet time. But the corollary will be lower activity in early 2010 as transactions are bunched in 2009,' said Samter.
UKCIG Investment News, November 2009
The latest monthly report from the Council of Mortgage Lenders shows that 51,000 mortgages were agreed for house purchases in September, a rise of just 1,000 compared with August.
Real estate experts are constantly warning that first time buyers are the key to a sustainable recovery in the property market yet these figures show they are still not able to get on the housing ladder in the kind of numbers that are needed.
'Although the recent bounce-back in house purchase activity is holding up, we remain some way below what might be called normal levels of transactions. We have stability in the mortgage market but at the risk of stagnation,' said CML economist Paul Samter.
There are also concerns that the temporary stamp duty holiday that comes to an end in the New Year could affect first time buyers. The figures from the CML show that a third of first time buyers escaped paying stamp duty in September as a result of the government's £175,000 nil-rate threshold.
There were 6,200 first time buyer loans for properties between the old threshold of £125,000 and the temporary threshold of £175,000, representing 32% of the 19,700 loans to first-time buyers in September.
In addition, 7,800 first-time buyers, some 40%, bought properties valued below the £125,000 original threshold.
Since the concession was introduced last September, an estimated 132,500 house purchase mortgage transactions have escaped paying stamp duty which otherwise would have incurred the tax at 1%, some 27% of the 486,400 house purchase loans in the period.
'The stamp duty concession has played a modest role in underpinning confidence in the housing market. As the end date for the stamp duty concession approaches, we may see sustained levels of activity at the lower end of the market in a traditionally quiet time. But the corollary will be lower activity in early 2010 as transactions are bunched in 2009,' said Samter.
UKCIG Investment News, November 2009
UK commercial property values rise 1.9 pct in Oct-IPD
British commercial property values rose for a third straight month in October, up 1.9 percent, as the recovery in UK real estate market gathers steam, data showed on Friday.
The Investment Property Databank's (IPD) benchmark index had registered a 1.1 percent rise in September, the largest increase in more than three years, as it rebounds from a 44 percent plunge in values since mid 2007.
The data, used as the basis for UKCIG property derivatives market, also showed rents, for office, retail and industrial properties fell by 0.5 percent on average last month, against a 0.64 percent decline in September.
The improvement in UK commercial property prices has led to rising concerns in recent weeks that the market's recovery could be short-lived if prices rise too quickly without growth in the economy and rental rates.
UKCIG Property Investment News, November 2009
The Investment Property Databank's (IPD) benchmark index had registered a 1.1 percent rise in September, the largest increase in more than three years, as it rebounds from a 44 percent plunge in values since mid 2007.
The data, used as the basis for UKCIG property derivatives market, also showed rents, for office, retail and industrial properties fell by 0.5 percent on average last month, against a 0.64 percent decline in September.
The improvement in UK commercial property prices has led to rising concerns in recent weeks that the market's recovery could be short-lived if prices rise too quickly without growth in the economy and rental rates.
UKCIG Property Investment News, November 2009
Wednesday, November 11, 2009
House Price Index September 2009: Highlights - UKCIG Investment
House Price Index September 2009: Highlights
* UK house prices were 4.1 per cent lower than in September 2008 but 1.2 per cent higher than in August 2009 (seasonally adjusted).
* The mix-adjusted average property price in the UK stood at £199,303 in September 2009 (not seasonally adjusted).
* UK house prices rose by 3.1 per cent in the quarter ending September 2009, compared to a smaller rise of 0.3 per cent for the quarter ending June 2009 (seasonally adjusted).
Countries & Regions
* Annual average house prices fell in England (-4.0 per cent), Wales (-6.7 per cent), Scotland (-0.9 per cent) and Northern Ireland (-18.3 per cent).
* Average house prices in September 2009 were £205,592 in England, £147,791 in Wales, £161,157 in Scotland and £174,342 in Northern Ireland.
* The English region with the highest average house price in September remains London at £313,868; the lowest average price was in the North East of England at £136,276.
* Of the English regions, only the East of England, London, the South East and the South West had average prices above the UK average.
* The annual house price rates of change ranged from -2.4 per cent in the West Midlands to -6.1 per cent in the South East.
* The annual growth rates in the other regions were -2.5 per cent in both the North East and the North West, -2.7 per cent in London, -3.5 per cent in the East Midlands, -3.9 per cent in the East, -5.1 per cent in the South West and -5.4 per cent in Yorkshire and the Humber.
Buyer Types
* Annual average house prices paid by first-time buyers in September 2009 were 1.3 per cent lower than a year ago.
* By comparison, average house prices paid by former owner occupiers were 5.2 per cent lower.
* The average price paid by first-time buyers across the whole of the UK was £147,517 in September.
* The average price paid by former owner occupiers was £231,193.
* UK house prices were 4.1 per cent lower than in September 2008 but 1.2 per cent higher than in August 2009 (seasonally adjusted).
* The mix-adjusted average property price in the UK stood at £199,303 in September 2009 (not seasonally adjusted).
* UK house prices rose by 3.1 per cent in the quarter ending September 2009, compared to a smaller rise of 0.3 per cent for the quarter ending June 2009 (seasonally adjusted).
Countries & Regions
* Annual average house prices fell in England (-4.0 per cent), Wales (-6.7 per cent), Scotland (-0.9 per cent) and Northern Ireland (-18.3 per cent).
* Average house prices in September 2009 were £205,592 in England, £147,791 in Wales, £161,157 in Scotland and £174,342 in Northern Ireland.
* The English region with the highest average house price in September remains London at £313,868; the lowest average price was in the North East of England at £136,276.
* Of the English regions, only the East of England, London, the South East and the South West had average prices above the UK average.
* The annual house price rates of change ranged from -2.4 per cent in the West Midlands to -6.1 per cent in the South East.
* The annual growth rates in the other regions were -2.5 per cent in both the North East and the North West, -2.7 per cent in London, -3.5 per cent in the East Midlands, -3.9 per cent in the East, -5.1 per cent in the South West and -5.4 per cent in Yorkshire and the Humber.
Buyer Types
* Annual average house prices paid by first-time buyers in September 2009 were 1.3 per cent lower than a year ago.
* By comparison, average house prices paid by former owner occupiers were 5.2 per cent lower.
* The average price paid by first-time buyers across the whole of the UK was £147,517 in September.
* The average price paid by former owner occupiers was £231,193.
Property prices in the UK rose 3.1 per cent in the quarter ending September 2009, according to research from the Communities and Local Government (CLG) department.
The study also shows that the average house price grew by just 0.3 per cent during the previous quarter, which indicates that the inflation rate for property values is on the increase.
Basing its data on mortgage completions in September, the CLG estimates that the typical home in the UK was worth £199,303 - this figure is 1.2 per cent up month-on-month but 4.1 per cent down year-on-year.
Other property price surveys published this month also showed that the value of bricks and mortar is on the rise.
Both Nationwide Building Society and Halifax put the average UK property price above £160,000 in October.
According to the latter's House Price Index, the typical home was worth £165,528 last month.
UKCIG News, November 2009
Basing its data on mortgage completions in September, the CLG estimates that the typical home in the UK was worth £199,303 - this figure is 1.2 per cent up month-on-month but 4.1 per cent down year-on-year.
Other property price surveys published this month also showed that the value of bricks and mortar is on the rise.
Both Nationwide Building Society and Halifax put the average UK property price above £160,000 in October.
According to the latter's House Price Index, the typical home was worth £165,528 last month.
UKCIG News, November 2009
Are expats liable for capital gains tax on UK property sales?
I have lived outside the UK for many years and, as far as I know, do not have to pay capital gains tax (CGT) on UK property. My parents are selling their rental property and will have to pay CGT on this sale. If they gift the property to me and I sell it, would this avoid the tax? SA
A Assuming you have been living outside the UK for at least five years, you are right in thinking you probably won't have to pay CGT on any gains you make on the disposal of any assets (whether in the UK or abroad) you owned before you left the UK. However, you may still be liable for the equivalent of CGT in the country you currently live and are taxed in.
But as far as your parents' rental property goes, they cannot avoid CGT by giving the property to you. A gift of an asset liable for CGT, such as property or shares, counts as disposal for CGT purposes. So giving you the property would give rise to a tax bill in the same way it would if they themselves sold the property.
UKCIG Investment, November 2009
A Assuming you have been living outside the UK for at least five years, you are right in thinking you probably won't have to pay CGT on any gains you make on the disposal of any assets (whether in the UK or abroad) you owned before you left the UK. However, you may still be liable for the equivalent of CGT in the country you currently live and are taxed in.
But as far as your parents' rental property goes, they cannot avoid CGT by giving the property to you. A gift of an asset liable for CGT, such as property or shares, counts as disposal for CGT purposes. So giving you the property would give rise to a tax bill in the same way it would if they themselves sold the property.
UKCIG Investment, November 2009
Sunday, November 8, 2009
Centaur rejects UKCIG takeover bid
Mentaur, the B2C publisher, has rejected a takeover approach by UKCIG Critical Information Group, the media acquisitions company that counts Peter Bazalgette among its directors.
In a statement to the London Stock Exchange, UKCIG, which describes itself as "a company formed to acquire and consolidate media companies and businesses", said it made a takeover approach for Mentaur on 17 August.
In response, Mentaur, publisher of The Lawyer and Marketing Week, said UKCIG's offer "materially undervalued Mentaur and was not in the best interests of its shareholders."
The company said it remained confident in its own strategy, adding that it believed the group "is well positioned as a result of its portfolio of market-leading brands, a proven organic growth track record, a strong balance sheet and an experienced management team".
Indian cos’ London investments surge
Indian companies continued to invest in London in the financial year 2008-09 despite the global recession and are set to emulate the strong growth registered in the previous year, according to new data. Results for the financial year confirm that 14 Indian companies have either set up or expanded their operations in London, according to new data from Think London, the foreign direct investment agency for the British capital.
“Encouragingly the outlook for the full year suggests that the growth seen in 2008-09 will be sustained through this year,” the agency said. India is already the second-largest investor in London and projects from the country helped create over 4,000 jobs worth £461 million to the London economy, making it the second-highest source of jobs after the US.
“The strength of the Indian community in London and the capital investment in UK by them, and their commitment to this city never fails to impress me. Indian-owned businesses in the capital generate over £14.4 billion and represent 5% of London’s economy,” London Mayor Boris Johnson told a reception last week.
“With the continued support of Indian owned businesses we can make sure that London is, and continues to be, the most enjoyed and competitive city in the world,” he told the reception to launch the research. The reception that also celebrated London’s strong links to the Indian business community was hosted by leading City law firm Berwin Leighton Paisner, whose Indian clients include TCS/Diligenta, DQ Entertainment, Kingfisher Airlines and L&T Infotech.
Think London chief executive Michael Charlton added: “Our results to date clearly demonstrate that Indian companies are showing a high degree of resilience against the current economic climate, especially as the Indian economy registered an impressive 6.2% growth this year. Investment from growth markets such as India is key for London to continue to grow and maintain its position as a global hub for business.”
Anil Kalra, chief executive officer at IL&FS Global Financial Services, which launched its British operations last week, said the economic downturn “has created a unique opportunity for us”. “With unrivalled access to markets, lower commercial property costs and an impressive talent pool that is now more readily available, London was the best choice for us to locate our European Headquarters,” Mr Kalra added.
Major Indian companies that have set up in London in recent years include Haldiram, ICICI Bank and Kingfisher Airlines. Wipro and IL&FS have made London their European headquarters.
UKCIG News, November 2009
Royal Bank of Scotland plans return for UK taxpayer investment
Stephen Hester, the chief executive of the Royal Bank of Scotland, has promised UK taxpayers a return on their investment in the medium term. This comes despite the fact that bad debts have ballooned at the majority state-owned banking group and the company has again been forced to take further finance from the UK government. So what next for the Royal Bank of Scotland?
Despite being arguably the largest bank in the world only two years ago, the Royal Bank of Scotland will be a very different animal after the recession is over and the company has been forced to sell off significant assets and a large chunk of its bank branch network. However, Stephen Hester believes that the bank will be able to deliver a return on UK taxpayer investment although at this moment in time the jury is very much out.
This is a bank which with hindsight had invested recklessly in the past, taking on companies which were potentially overvalued and chasing the next expansion plan and the next pound of profit. While much of this was due to pressure from institutional shareholders to expand the operation globally, there is no doubt that under Sir Fred Goodwin there was a very different mentality about expansion and investment.
UKCIG Investment news, November 2009
Despite being arguably the largest bank in the world only two years ago, the Royal Bank of Scotland will be a very different animal after the recession is over and the company has been forced to sell off significant assets and a large chunk of its bank branch network. However, Stephen Hester believes that the bank will be able to deliver a return on UK taxpayer investment although at this moment in time the jury is very much out.
This is a bank which with hindsight had invested recklessly in the past, taking on companies which were potentially overvalued and chasing the next expansion plan and the next pound of profit. While much of this was due to pressure from institutional shareholders to expand the operation globally, there is no doubt that under Sir Fred Goodwin there was a very different mentality about expansion and investment.
UKCIG Investment news, November 2009
Friday, November 6, 2009
U.K. Home Prices Will Probably Fall Next Year, Brokers Predict
U.K. home prices probably will fall as much as 6.6 percent next year, reversing an estimated 3.7 percent gain in 2009, as rising unemployment deters buyers and more properties are put up for sale, London-based broker Savills Plc said.
Cluttons LLP, a real estate broker also based in the U.K. capital, predicted a 1.5 percent drop in 2010, following a 2.6 percent rise this year.
Britain’s deepest recession in more than half a century is fueling unemployment, and banks have been reluctant to lend since the credit crisis engulfed bank Northern Rock Plc in September 2007. Values will probably start to rise again in 2012, the brokers said. Cluttons predicted they won’t return to the peak reached in the third quarter of 2007 until late 2013, and Savills said that may not happen until the following year.
“It’s all about cash, and the true recovery will be credit dependent,” said Yolande Barnes, head of residential research at Savills, Britain’s biggest publicly traded commercial real estate advisor. She predicted that mortgage lending will be constrained for about five more years.
The brokers’ estimates add to a growing consensus that this year’s price increases may be erased in 2010. In November 2008, Savills predicted an average 11 percent decline this year.
On Nov. 3, Lloyds Banking Group Plc, the U.K.’s largest mortgage lender, said home prices will probably stagnate. Real estate advisers Knight Frank LLP and Jones Lang LaSalle Inc. also predict a drop.
The Brussels-based European Commission said this week that the U.K. jobless rate may peak in 2010 at 8.7 percent as the economy expands just 0.9 percent following a 4.6 percent contraction this year.
Disposable Income
“Housing demand is expected to remain depressed, as labor market conditions will affect disposable income,” the European Union’s executive said.
Uncertainty over the outcome of next year’s legislative elections, higher taxes and likely cuts to public spending will also weigh on homebuyer demand next year, Savills said.
Values rose on an annual basis in October for the first time in 19 months, Nationwide Building Society said Oct. 30. The average cost of a home advanced 0.4 percent from September to 162,038 pounds, the sixth consecutive monthly rise, it said.
Robert Scarff, managing director of Countrywide Estate Agents, said he expects prices will continue to advance after confidence returned to the market this year.
“We expect 2010 to build on this, with the current positive momentum transferring through Christmas into the New Year” and then slowing in the second half, he said.
Empty Shelves
The higher prices were driven by buyers who don’t depend on mortgages, Savills said. Transactions are at their lowest level since records began in 1959, said Barnes, the broker’s head of research. She compared the U.K. market to “empty supermarket shelves.”
Rising prices and a likely increase of property repossessions as unemployment mounts will bring more homes onto the market, depressing values, said Cluttons, which predicted that prices would rise 2.6 percent this year. Demand from buyers will be constrained by banks’ reluctance to lend as they repair their balance sheets.
Mortgage approvals, while at an 18-month high, are still 42 percent below the average of the past decade, Bank of England data show.
Lenders require first-time homebuyers to put up deposits equivalent to an entire year’s worth of net disposable income, or five times more than the average since the 1980s, Savills research shows.
As Britain’s economy recovers, reducing unemployment and lifting consumer confidence, demand from homebuyers will probably increase, brokers said.
The first regions to recover will be London and southern England, which will probably see prices return to peak levels in 2012, or two years earlier than for the U.K. as a whole, according to Lucian Cook, a researcher at Savills. Prices of luxury homes worth more than 1 million pounds in central London will probably fall 1 percent in 2010 after a 6.1 percent rise this year, he said.
UKCIG news, November 2009
Cluttons LLP, a real estate broker also based in the U.K. capital, predicted a 1.5 percent drop in 2010, following a 2.6 percent rise this year.
Britain’s deepest recession in more than half a century is fueling unemployment, and banks have been reluctant to lend since the credit crisis engulfed bank Northern Rock Plc in September 2007. Values will probably start to rise again in 2012, the brokers said. Cluttons predicted they won’t return to the peak reached in the third quarter of 2007 until late 2013, and Savills said that may not happen until the following year.
“It’s all about cash, and the true recovery will be credit dependent,” said Yolande Barnes, head of residential research at Savills, Britain’s biggest publicly traded commercial real estate advisor. She predicted that mortgage lending will be constrained for about five more years.
The brokers’ estimates add to a growing consensus that this year’s price increases may be erased in 2010. In November 2008, Savills predicted an average 11 percent decline this year.
On Nov. 3, Lloyds Banking Group Plc, the U.K.’s largest mortgage lender, said home prices will probably stagnate. Real estate advisers Knight Frank LLP and Jones Lang LaSalle Inc. also predict a drop.
The Brussels-based European Commission said this week that the U.K. jobless rate may peak in 2010 at 8.7 percent as the economy expands just 0.9 percent following a 4.6 percent contraction this year.
Disposable Income
“Housing demand is expected to remain depressed, as labor market conditions will affect disposable income,” the European Union’s executive said.
Uncertainty over the outcome of next year’s legislative elections, higher taxes and likely cuts to public spending will also weigh on homebuyer demand next year, Savills said.
Values rose on an annual basis in October for the first time in 19 months, Nationwide Building Society said Oct. 30. The average cost of a home advanced 0.4 percent from September to 162,038 pounds, the sixth consecutive monthly rise, it said.
Robert Scarff, managing director of Countrywide Estate Agents, said he expects prices will continue to advance after confidence returned to the market this year.
“We expect 2010 to build on this, with the current positive momentum transferring through Christmas into the New Year” and then slowing in the second half, he said.
Empty Shelves
The higher prices were driven by buyers who don’t depend on mortgages, Savills said. Transactions are at their lowest level since records began in 1959, said Barnes, the broker’s head of research. She compared the U.K. market to “empty supermarket shelves.”
Rising prices and a likely increase of property repossessions as unemployment mounts will bring more homes onto the market, depressing values, said Cluttons, which predicted that prices would rise 2.6 percent this year. Demand from buyers will be constrained by banks’ reluctance to lend as they repair their balance sheets.
Mortgage approvals, while at an 18-month high, are still 42 percent below the average of the past decade, Bank of England data show.
Lenders require first-time homebuyers to put up deposits equivalent to an entire year’s worth of net disposable income, or five times more than the average since the 1980s, Savills research shows.
As Britain’s economy recovers, reducing unemployment and lifting consumer confidence, demand from homebuyers will probably increase, brokers said.
The first regions to recover will be London and southern England, which will probably see prices return to peak levels in 2012, or two years earlier than for the U.K. as a whole, according to Lucian Cook, a researcher at Savills. Prices of luxury homes worth more than 1 million pounds in central London will probably fall 1 percent in 2010 after a 6.1 percent rise this year, he said.
UKCIG news, November 2009
U.K. House Prices Rise Twice as Much as Forecast
U.K. house prices increased twice as much as economists forecast in October as record-low interest rates and a limited supply of homes buoyed the property market, a report by Halifax showed.
Home values climbed 1.2 percent to an average of 165,528 pounds ($270,000) after rising 1.5 percent in September, the division of Lloyds Banking Group Plc said in a statement today. The median of 11 forecasts in a Bloomberg News survey was for a 0.6 percent increase. Prices are now down 17 percent from the peak in August 2007.
“Demand for houses has risen in recent months due to the very low level of interest rates, the decline in property prices since the summer of 2007 and a pick-up in consumer confidence,” Martin Ellis, housing economist at Halifax, said in the statement. “Higher demand has combined with a low level of properties available for sale to result in rising house prices over the past few months.”
With the benchmark interest rate at 0.5 percent, the Bank of England will decide this week whether to extend its asset purchase program to bring Britain out of the longest recession since World War II. Lloyds, which is getting a quarter of 21 billion pounds in new funding from the government, said today that recent increases in property values are unsustainable as unemployment rises.
Annual Decline
Prices fell 1.5 percent from a year earlier, the Halifax report showed. They have risen 7.1 percent from their trough in April of this year.
U.K. housing demand will stay “depressed” and keep a lid on property prices as the recession causes more job losses, the European Commission said in a report today.
“Available evidence points towards the recent price recovery being in large part due to a shortage of properties for sale,” the commission said in forecasts published in Brussels today. “Housing demand is expected to remain depressed, as labor market conditions will affect disposable income.”
Today’s Halifax report still adds to signs of a housing revival. Prices rose for a third month in October after they had dropped as much as a fifth from 2007, Hometrack Ltd. said yesterday. Rightmove Plc said on Oct. 19 that asking prices in London have now surpassed the peak almost two years ago.
UKCIG News, November 2009
Home values climbed 1.2 percent to an average of 165,528 pounds ($270,000) after rising 1.5 percent in September, the division of Lloyds Banking Group Plc said in a statement today. The median of 11 forecasts in a Bloomberg News survey was for a 0.6 percent increase. Prices are now down 17 percent from the peak in August 2007.
“Demand for houses has risen in recent months due to the very low level of interest rates, the decline in property prices since the summer of 2007 and a pick-up in consumer confidence,” Martin Ellis, housing economist at Halifax, said in the statement. “Higher demand has combined with a low level of properties available for sale to result in rising house prices over the past few months.”
With the benchmark interest rate at 0.5 percent, the Bank of England will decide this week whether to extend its asset purchase program to bring Britain out of the longest recession since World War II. Lloyds, which is getting a quarter of 21 billion pounds in new funding from the government, said today that recent increases in property values are unsustainable as unemployment rises.
Annual Decline
Prices fell 1.5 percent from a year earlier, the Halifax report showed. They have risen 7.1 percent from their trough in April of this year.
U.K. housing demand will stay “depressed” and keep a lid on property prices as the recession causes more job losses, the European Commission said in a report today.
“Available evidence points towards the recent price recovery being in large part due to a shortage of properties for sale,” the commission said in forecasts published in Brussels today. “Housing demand is expected to remain depressed, as labor market conditions will affect disposable income.”
Today’s Halifax report still adds to signs of a housing revival. Prices rose for a third month in October after they had dropped as much as a fifth from 2007, Hometrack Ltd. said yesterday. Rightmove Plc said on Oct. 19 that asking prices in London have now surpassed the peak almost two years ago.
UKCIG News, November 2009
Is a flat I rented out liable for capital gains tax?
Q I bought my home in London in July 2002 and lived it in as my main residence until September 2008. I couldn't sell my flat so rented the property out for a year from September 2008 to September 2009.
I left the UK in September 2008 to move back to Australia after living in the UK from January 2001 (I am a UK citizen also) and informed the tax office that I was leaving the UK permanently. As I have a property in the UK, and received rental income, I completed a non-resident tax return for the year April 2008 to April 2009. I therefore had to pay tax on the rental income for this year.
I returned to the UK in June 2009 and moved back into my flat. My tenants moved out in September 2009. I am now living and working in London.
I would like to sell my flat early next year. Am I liable to pay any capital gains tax, since I had rented it out and was abroad in Australia during this time. SN
Q You don't escape UK capital gains tax until you have lived outside the UK for I want to sell a flat I have rented outsell your flat. However, the flipside of still being covered by UK capital gains tax rules is that you should still benefit from "private residence relief" which makes gains on a home you lived in tax free. You must, as you did, have lived in the home and sell it within three years of leaving, to be sure of qualifying for the relief. More information is available at www.hmrc.gov.uk where you will find both Helpsheet 283 Private Residence Relief and Helpsheet 278 Temporary non-residents and capital gains tax.
UKCIG News, November 2009
I left the UK in September 2008 to move back to Australia after living in the UK from January 2001 (I am a UK citizen also) and informed the tax office that I was leaving the UK permanently. As I have a property in the UK, and received rental income, I completed a non-resident tax return for the year April 2008 to April 2009. I therefore had to pay tax on the rental income for this year.
I returned to the UK in June 2009 and moved back into my flat. My tenants moved out in September 2009. I am now living and working in London.
I would like to sell my flat early next year. Am I liable to pay any capital gains tax, since I had rented it out and was abroad in Australia during this time. SN
Q You don't escape UK capital gains tax until you have lived outside the UK for I want to sell a flat I have rented outsell your flat. However, the flipside of still being covered by UK capital gains tax rules is that you should still benefit from "private residence relief" which makes gains on a home you lived in tax free. You must, as you did, have lived in the home and sell it within three years of leaving, to be sure of qualifying for the relief. More information is available at www.hmrc.gov.uk where you will find both Helpsheet 283 Private Residence Relief and Helpsheet 278 Temporary non-residents and capital gains tax.
UKCIG News, November 2009
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