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UK house prices up 7.3 per cent – strongest annual growth in six years

UK house prices enjoyed their strongest annual growth for six years in 2020 as the market was spurred on by tax breaks and changing demand amid the pandemic, according to latest figures from Nationwide Building Society.

The average UK house price jumped 7.3 per cent this year to £230,920 after rising 0.8 per cent in December alone.

Broken down by region, England saw prices rising 6.9 per cent year-on-year in the fourth quarter.

Wales was the next best price performer, with a 6.6 per cent rise, followed by Northern Ireland (up 5.9 per cent) and Scotland (up 3.2 per cent).

The report revealed that prices have jumped 5.3 per cent since March, when the pandemic struck, after demand was sent surging by a stamp duty holiday and the shift to homeworking.

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Nationwide said the stamp duty boost had brought forward people’s home-moving plans, while changing working patterns had increased demand for larger homes in less densely populated locations.

Robert Gardner, Nationwide’s chief economist, said: “The resilience seen in recent quarters seemed unlikely at the start of the pandemic.

“Indeed, housing market activity almost ground to a complete halt during the first lockdown as the wider economy shrank by an unprecedented 26 per cent.

“But, since then, housing demand has been buoyed by a raft of policy measures and changing preferences in the wake of the pandemic.”

However, he added that the outlook for the housing market remains “highly uncertain” as restrictions to control the virus tighten across the UK and with government support measures and the stamp duty holiday set to end in the spring.

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He said: “Housing market activity is likely to slow in the coming quarters, perhaps sharply, if the labour market weakens as most analysts expect, especially once the stamp duty holiday expires at the end of March.”

Howard Archer, chief economist at the EY Item Club, also warned that the property market will see a reversal of fortunes in 2021 and could fall by around 5 per cent by the end of next year.

He said: “We believe that the housing market is likely to come under mounting near-term pressure as the economy is hampered by pandemic-related restrictions, while there may well still be a significant rise in unemployment despite the furlough scheme being extended until April.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors, said: “We are in a very different place now as optimism following the initial rollout of a vaccine and the possibility of a Brexit deal has been replaced by realisation that the effects of the virus will get worse before they improve, as well as recognition of the negative impact on confidence and values.

“However, the determination of the overwhelming majority of buyers and sellers to conclude sales agreed prior to Christmas, relatively few price renegotiations and approval of the Oxford/AstraZeneca vaccine bodes well, provided present constraints prove relatively short term.”

Source: The Irish News

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House prices rose at twice the rate of flats in 2020

The rate at which the price of houses is rising is more than double that for flats as lockdown-weary Britons look for more space.

Annual property price growth for houses in the UK is currently running at 4.3%, while price growth for flats is just 1.8%, according to our latest House Price Index.

The trend is being seen across the country, with all regions reporting significantly stronger increases in the value of houses than those of flats.

Richard Donnell, our director of research and insight, said: “The search for space has been a key feature of the rebound in market activity as households re-evaluate their housing requirements.

“Demand for family homes with gardens, parking and extra space to work from home has continued to rise.”

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Why is this happening?

The coronavirus pandemic triggered a ‘once-in-a-lifetime reassessment of housing’ in 2019, as lockdowns and social distancing created a greater appetite for home offices and outdoor space.

Analysis of our advanced search property tool over the past 12 months found that ‘garden’ was the top feature buyers looked for, while ‘detached’, ‘rural’ and ‘secluded’ all also made it into the top 10.

The high level of demand for houses is putting upward pressure on prices, as demand outstrips supply.

By contrast, flats are suddenly in less demand than they were before the pandemic, leading to slower price growth.

Who does it affect?

The rise in the value of houses was strongest in Wales, followed by the North West and Yorkshire and the Humber, all regions in which affordability is less of a barrier to price growth.

By contrast, the price of flats was broadly unchanged year-on-year in the East, while they edged ahead by less than 1% in the West Midlands and the South West.

The current trend could make it harder for sellers trying to trade up the property ladder from a flat to a house. This is because they are not only likely to find their current property takes longer to sell, but they will also face increased competition for their next home and an enlarged gap between the price of the two properties, if they are staying in the same region.

Read about the UK Housing Market via our Specialist Residential & Buy to Let Division

What’s the background?

The quest for more space has contributed to a shift in the demographic profile of home movers, and there has been a notable increase in sales in more affluent demographics, where house prices are typically higher.

This shift, along with a high level of transactions, has contributed to a 26% rise in the value of property that changed hands in 2020, with sales rising by £62 billion to £300 billion.

Moving into 2021, older, equity rich, long-time homeowners are expected to continue to take a growing share of sales.

Top three takeaways

  • The rate at which the price of houses is rising is more than double that for flats as lockdown-weary Britons look for more space
  • Annual property price growth for houses in the UK is currently running at 4.3%, while price growth for flats is just 1.8
  • The trend is being see across the country, with all regions reporting significantly stronger increases in the value of houses than those of flats.

By Nicky Burridge

Source: Zoopla

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Tenant rent arrears decline but industry urged to remain cautious

The percentage of tenants in rent arrears decreased during October and November, according to research from PayProp.

Payment data from the rental payment platform also shows that the typical percentage of rent in arrears fell consistently from August to November.

However, with strict COVID-19 restrictions across large parts of the country set to remain in place for the foreseeable future, PayProp said letting agents and landlords should prepare themselves for arrears increasing again in the first few months of 2021.

PayProp’s platform data offers financial evidence that the percentage of tenants in arrears dropped to 11.8% in November, down from 12.2% in October.

This is the lowest percentage recorded since before the spring lockdown in March when 9.6% of tenants were in arrears.

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The number of tenants in arrears spiked during September, to 15.1%, although this remains below the 2020 peak of 15.5% recorded in May. A rise in September could be due to increased redundancies as official figures showed that 11.3 people per 1,000 employees were made redundant as the pandemic continued to hit businesses.

Neil Cobbold, chief sales officer at PayProp, said: “The general downward trend of tenants in arrears over the autumn and winter months of 2020 is positive news for letting agencies and landlords.

“Falling arrears suggest that even though restrictions were tightened once more towards the end of the year, society has adapted to the ‘new normal’.”

The research shows that the percentage of rent owed by tenants in arrears fell to 121.1% in November, down from 124.4% in October and 125.5% in September.

The level of rent owed by tenants in arrears in November was equivalent to the level recorded in May but didn’t quite reach the peak of 127% recorded in August.

Meanwhile, 77% of tenants paid off some or all of their arrears between September and October, while a further 50% paid back arrears between October and November.

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Between August and November, the percentage of tenants reducing their arrears averaged between 44% and 48%, while the percentage increasing the amount they owed also remained high at an average of 45% to 49%.

Cobbold added: “Our research shows that on the whole, tenants who end up in arrears try to clear them. Even if they cannot afford to pay back the full amount, renters are generally open to reducing what they owe through affordable repayment plans.

“A particularly high level of tenants reducing their arrears during September could have been linked to a resumption of evictions in England and Wales, with renters agreeing to pay back what they owe in order to avoid their landlord seeking repossession.”

Despite the reduction in arrears recorded between September and November, the situation could worsen again in the early part of 2021.

PayProp said nthis is partly due to a seasonal bump in arrears as people spend more over the festive period. Meanwhile, with millions of people under the strictest tier 4 restrictions, more jobs could be at risk.

Cobbold said: “Although the situation improved towards the end of 2020, current market conditions mean that letting agents and landlords should be cautious at the start of 2021 as things could get slightly worse before they get better.

“Agents must ensure they have the systems in place to deal with arrears, while facilitating effective communication between landlords and tenants.”

Although arrears could rise again in the coming months, 70% of tenants surveyed by PayProp said COVID-19 and subsequent lockdowns have not made it more difficult for them to pay rent.

“Restrictions put pressure on sectors such as hospitality, but they also give tenants the opportunity to save money which would otherwise have been spent on socialising.

“With the extension of the furlough scheme until the end of April, as well as the ongoing national rollout of a COVID-19 vaccine, there is optimism that tenant finances will be in a stronger position by the middle of 2021,” Cobbold concluded.

Source: Mortgage Introducer

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More Support Needed Landlords Tell Inquiry

Rather than concentrating on measures to block tenant evictions, Government focus should be on providing better support for the private rented sector, so as to help both landlords and tenants.

This is what National Residential Landlords Association chief executive Ben Beadle told a Housing, Communities and Local Government Select Committee’s Inquiry into the Impact of COVID-19 on homelessness and the private rented sector this week.

It was true that the Government had already provided unprecedented levels of support for the sector, Beadle told the inquiry. Even so, a solid commitment to prevent greater problems was needed, he said.

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While helping some tenants, changes made by the Government in response to the Coronavirus Crisis had also caused significant hardship to some landlords, in particular to those whose tenants had been in significant rent arrears prior to the crisis.

The NRLA has been campaigning for financial support to help tenants pay off arrears built up during the crisis along the lines of schemes already operating in Scotland and Wales.

The HCLG Committee inquiry was set up to consider both the immediate and long-term impact of the pandemic on the homeless, rough sleepers and those in the private rented sector. Current hearings are taking evidence from stakeholders about what is being done and what further support is needed. Besides hearing from the NRLA, the committee also heard this week from representatives of Citizens Advice and Shelter, organisations which have joined the NRLA in calling for financial help for renters forced into arrears by the Coronavirus Crisis.

‘What we are lacking is a longer-term strategy to help the sector and I think the measures we have laid out with our colleagues from Crisis and Citizens Advice and others are a route to sustaining tenancies, which is what everyone wants’, said Beadle.

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  • No eviction notices are to be served until 11 January at the earliest and, given the 14 day notice period required, no evictions are expected to be enforced until 25 January 2021 at the earliest. The only exceptions to this are the most serious circumstances: illegal occupation, false statement, anti-social behaviour, perpetrators of domestic abuse in social housing, where a property is unoccupied following the death of a tenant, and extreme rent arrears equivalent to nine months’ rent with any arrears accrued since 23 March discounted.

This is the advice contained in updated guidance published by the Government this week: COVID-19 and renting: guidance for landlords, tenants and local authorities. This provides advice to landlords and tenants on the provisions in the Coronavirus Act 2020, and about their rights and responsibilities during the COVID-19 outbreak.

Source: Residential Landlord

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HMRC: November residential transactions up 19.3% on last year

UK residential transactions in November 2020 stood at 115,190, 19.3% higher than November 2019 and 8.6% higher than October 2020, according to the latest stats from HMRC.

On the non-residential front transactions stood at 9,970, 6.9% higher than November 2019 and 10.3% higher than October 2020.

Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Transactions are always a better indicator of market health than more volatile house prices.

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“However, despite these numbers showing a still-accelerating trend, they reflect sales which were agreed several months previously. Since then, the market has been moving closer to hibernation as is traditional at this time of year.

“It will be a few months at least before transactions fall in line with the reduced activity that we have been seeing on the ground over the past few weeks. Nevertheless, prospects for 2021 remain relatively positive bearing in mind the determination of the overwhelming majority of buyers and sellers to complete their moves even if inevitably some will miss the stamp duty deadline.”

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Paul Stockwell of Gatehouse Bank added “The UK property market has undergone an incredible turnaround this year. In the space of seven months, sales volumes have rebounded from the lowest level since records began to a five-year high in November.

“The latest data shows mortgage approvals still running at a 13-year-high so, while it’s widely accepted that the bumper house price growth we’ve seen this year must cool as we enter 2021, a decline in the number of transactions is by no means assured. Annual growth in sales volumes has actually accelerated, more than doubling in the space of a month, which is excellent news for the property market as a whole.

“It is entirely possible that volumes hold up next year, even as valuations cool after a glut of activity fuelled by the stamp duty holiday and a widespread desire to move to larger homes after repeated lockdowns.”

Source: Mortgage Introducer

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The Scottish property market tipped to fly in 2021

THE logistics and residential real estate sectors of the property market in Scotland have been forecast to “dramatically outperform” in 2021, when Brexit will quickly fade as a major issue after five fractious years, a new report declares.

The dramatic shift to online shopping during the pandemic has led to investors flocking to put money into property in the logistics sector.

Property firm CBRE expects that trend to continue next year, when it predicts that funding will become available in Scotland for investment in additional warehouse space.

According to CBRE, the pandemic has underlined the essential role of the logistics sector in sustaining the flow of goods. It anticipates that the year ahead will see occupiers focus on building more resilient supply chains, increasing capacity and diversifying suppliers to safeguard against future disruptions.

CBRE says £174 million has been invested in industrial and logistics property in Scotland so far this year. While this is currently down on the £185m invested last year, it is expected the 2020 total will reach the five-year average of £200m if deals under offer and likely to conclude before the end of the year are taken into account.

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David Reid, associate director of CBRE Scotland’s industrial and logistics team, said: “We expect 2021 to be another strong year for our market in Scotland. The incredible take-up during 2020 has resulted in critically low stock levels and with continued strong demand we urgently need new speculative development to meet the future needs of occupier requirements. We are working with a number of developers to plug this shortfall in supply.”

CBRE’s 2021 UK Real Estate Market Outlook forecasts that the logistics and residential sectors will achieve significant growth next year, although it notes that a weaker economy will lead to lower and even negative rental growth.

The agent says there has been a reduction in overall real estate investment in Scotland of around 50 per cent this year so far, dipping to £1.06bn from £1.99bn in 2019 amid continuing Brexit uncertainty. Next year, though, it expects investment to rebound to £1.5bn, taking it closer to the five-year average of £2.1bn.

Steven Newlands, executive director in CBRE’s investment team, said: “Demand is expected to come from a wide variety of sources, including sovereign wealth funds, overseas institutions and European funds. Overseas private investors are also expected to be particularly active. “For now, investors are focusing on the winners from the pandemic: the logistics and residential sectors and core assets with near-guaranteed income. In 2021 we expect this to continue until the vaccine is rolled out.”

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The report flags expectations of a gradual recovery in the office market, with investment and take-up expected to steadily recover after a difficult start to the year. CBRE notes that UK office yields will remain stable despite capital values falling by around 11 per cent over 2020 and 2021.

While significant doubts remain as to whether the UK and European Union will agree a trade deal before December 31, CBRE expects the Brexit issue to gradually fade. It said next year will see a recovery in the commercial property investment market because of record low interest rates and an “abundance of capital looking for a return”. This year the market has stalled amid the uncertainty caused by the pandemic, as restrictions have limited the ability of investors to travel to inspect sites. But Mr Newlands said: “These concerns, as well as the restrictions, will ease over time for some asset types as the occupier market recovers.”

CBRE hailed the resilience of the residential market, and expects it to perform strongly in 2021, supported by “tax incentives, resilient demand and lagging supply.” Mr Newlands said: “Despite Covid-19 restrictions, investment into the residential sector was strong in 2020. There is a high level of equity targeting the build-to-rent sector and lending also remains highly competitive.”

Miller Mathieson, managing director of CBRE Scotland and Northern Ireland, said: “In Scotland we will have many opportunities and challenges in common with the rest of the UK. In particular we will see significant activity in the logistics sector as values improve and new speculative development becomes viable. This is the favoured sector of investors and Scotland still has major growth potential. Similarly, I think we will, at last, see Scotland embrace all the different forms of residential investment around affordable housing, build-to-rent and co-living.

“Our biggest challenge will undoubtedly be in the retail sector with the continued growth of online sales and the increasing number of CVAs and administrations.”

By Scott Wright

Source: Herald Scotland

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Sales agreed on £62bn more homes in 2020 than 2019

More activity at higher price points means the value of homes selling is 26% higher than in 2019, with the value of sales agreed in 2020 up £62bn on the previous year, the latest Zoopla House Price Index shows.

Zoopla found that the pandemic has driven a seismic search for space and quality of location, with 40% more buyers across the whole of 2020 compared to 2019 – despite 2+ month closure of UK housing market.

The highest rates of price inflation are in regional housing markets, but greatest increase in market activity has been concentrated in London, the South East and Eastern England.

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Richard Donnell, director of research & insight, Zoopla, said: “The housing market is ending 2020 strongly with more buyers looking for a home than this time last year. More sales at higher prices have boosted the value of homes selling in 2020, led by a strong rebound in southern England.

“The ‘once in a lifetime re-assessment of housing’ kick-started by the pandemic has further to run in our view and this will support demand into 2021. With a long Christmas weekend, and many households isolating in smaller groups, we expect interest in housing to be stronger than usual ahead of the traditional Boxing Day bounce when interest in housing jumps and the next tranche of would-be buyers.

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“While market activity is being boosted by latent demand unlocked by the pandemic, the housing market is not immune to economic forces and rising unemployment. Economic pressures are already impacting in parts of the market, reducing the volume and share of sales in less wealthy areas, for example.

“Looking ahead to 2021 we expect house price growth to reach 5% by mid Q1 and then slow to +1% by the end of the year as demand starts to weaken over 2021 H2. The number of completed housing transactions will be buoyed by a strong Q1 with sales agreed over 2020 Q4 completing early next year.

“Overall, we expect the number of completed housing transactions to match 2020 levels at 1.1m.”

By Ryan Fowler

Source: Mortgage Introducer

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London leavers bought 73,950 homes outside the capital in 2020

In 2020 London leavers purchased 73,950 homes outside the capital, the highest number in four years, Hamptons research has found.

There has been a clear increase in the popularity of London outmigration since the onset of Covid-19.

In the first half of 2020, London leavers bought 6.9% of homes sold outside the capital, equating to 24,480 sales.

However, in the second half of 2020, this figure rose to 7.8% and twice as many sales (49,470).

Aneisha Beveridge, head of research at Hamptons, said: “Despite Covid-19 closing the housing market for seven weeks, the number of homes bought by Londoners outside the capital has risen to the highest level in four years.

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“While leaving London has been a rite of passage for many, often families reaching life stage milestones, the effects of lockdown and the desire for space seems to have heightened this drift.

“Meanwhile the lure of a stamp duty holiday acted as an impetus for more buyers to bring future planned moves forward.

“The prospect of homeworking more regularly has also meant that London leavers are moving further than ever before. The average London leaver moved 10 miles further than in 2019 as buyers’ favour space over commutability.”

The average London leaver spent £372,860 on their home outside the capital.

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The typical person leaving London from May onwards travels as far as Cambridge to the north, Colchester to the east, Brighton to the south or Didcot to the west.

It seems this is a trend that’s likely to stay, as we head into 2021.

Beveridge added: “We expect this outmigration trend to continue into the first half of next year too.

“But usually as prices in the capital begin to flatline, which we forecast to happen in the second half of 2021, more Londoners decide stay put.

“Even so, given the housing market has been anything but normal since the onset of Covid, we expect to see the total number of homes bought by London leavers next year hit 2016 levels.”

BY RYAN BEMBRIDGE

Source: Property Wire

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2021 house price growth to reach 4%

House prices should inflate by 4% in 2021, Rightmove’s House Price Index found.

The firm said housing will be a high priority for people but price rises for newly marketed properties should be more modest than this year.

Prices this year have jumped by 6.6%, while the first quarter of next year is expected to be very busy due to the stamp duty deadline.

After that however it’s expected that things slow down, though cheap mortgage rates should continue to support the market.

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Jeremy Leaf, north London estate agent and a former RICS residential chairman, said: “Interestingly, Rightmove is forecasting solid price growth for 2021, despite activity clearly slowing as 2020 draws to a close.

“At the coalface, we are experiencing much the same but expecting a busy first quarter as buyers and sellers rush to take advantage of the stamp duty concession. However, we don’t anticipate a cliff-edge scenario at present.

“Nearly all sales agreed seem to be proceeding to exchange of contract, unless exceptional circumstances prevail and prices are not being widely renegotiated in anticipation of a market fall due to Brexit, the pandemic or potentially worsening economic news.”

The possibility of the stamp duty holiday being extended was discussed once again.

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Sam Mitchell, chief executive of online estate agent Strike, said: “It’s hard to predict what will happen in the next few months, particularly with so much uncertainty around Brexit deal talks and rising unemployment levels as a result of the pandemic.

“However, people’s increased home working flexibility and desires for more space and rural locations is likely to keep demand ticking by. Plus, the recent breakthrough with the vaccine news has injected a newfound confidence in those who might have been on the fence about buying or selling.

“There’s no doubt that the government will also continue its commitment to the country’s economic recovery with continued support for the UK property market included.

“Who knows, maybe they’ll consider an extension to the stamp duty scheme or turn their focus back to helping first time buyers get a foot onto the property ladder.”

Tomer Aboody, director of property lender MT Finance, said: “What a crazy year it has been for the property market, one which has to go down on record as the biggest rollercoaster in terms of market sentiment, transaction numbers and even a complete standstill.

“Whether we ever see this again, who knows but what is for sure is that buyers’ demands and priorities have changed. Space is at a premium, with families especially prioritising the commuter belt and local village amenities.

“Confidence is set to continue for the first quarter of next year until the furlough scheme ends and possibly stamp duty relief at the end of March. Thereafter, we are at the government’s mercy – will it extend the stamp duty holiday and extend the feel-good factor for the market?”

BY RYAN BEMBRIDGE

Source: Property Wire

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Number of UK buy-to-let landlords has increased by 49% in five years

The number of UK buy-to-let landlords has risen 49% in the last five years to an all-time high of 2.7 million, research from ludlowthompson estate agents found.

The residential market has stayed relatively strong during the coronavirus pandemic, though the commercial property market has fared poorly, as 54% of tenants have held discussions with their landlords about taking a rent holiday.

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Stephen Ludlow, chairman of ludlowthompson, said: “The buy-to-let market has continued to provide a reliable return on investment for landlords, even during the worst of the pandemic when other forms of investments went through a period of intense volatility.”

“The historic resilience of residential property means many private investors are still looking to add to their holdings, particularly before March 2021 when the stamp duty holiday ends.”

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“We would advise existing and prospective landlords to consider re-purposing their properties to meet the changing needs of tenants.

“With people spending more time at home, having extra space both in and outdoors has become more important than ever. Outdoor areas and home offices are both in very high in demand, as is accessibility to high-speed WiFi.”

BY RYAN BEMBRIDGE

Source: Property Wire

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