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ARLA issues stark warning – “Renters are in for a rough ride in 2018”

ARLA Propertymark has issued a downbeat report on the lettings sector’s start to 2018.

Its report on the market’s performance in January says the number of properties letting agents managed fell by eight per cent with 184 per branch compared to 200 in December.

Meanwhile the gap between supply and demand widened in January with more prospective renters coming onto the market; on average, letting agents registered 70 prospective tenants per branch in January, compared to just 59 in December.

The association says landlords kicked off 2018 with contract negotiations as one in five tenants experienced rent hikes in January, compared to 16 per cent in December.

It says that while this paints a bleak picture for renters looking into 2018, it’s actually down year on year. In January 2017, 23 per cent on tenants had their rents increased, and 30 per cent were subject to rent rises in January 2016.

“Renters are in for a rough ride in 2018. Housing stock is falling as rising taxes continue to force established landlords out of the market and deter entry into the sector – and the volume of renters is increasing as the cost of buying a home is moving further out of reach for many” explains David Cox, ARLA Propertymark chief executive.

“The fact that one in five tenants are experiencing rent increases is just another blow. Ultimately, until the prospect of investing in the buy-to-let market is more attractive for prospective landlords, and stock subsequently increases, tenants will continue to feel the burn” he adds.

Source: Letting Agent Today

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BoE official identified a big problem for London’s inflated commercial property market

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LONDON — One of the Bank of England’s most senior officials identified a problem at the heart of London’s inflated commercial property market in a speech on Thursday evening.

Speaking at Imperial College London, Alex Brazier, the bank’s executive director for financial stability strategy and risk said that the way in which investors are attempting to make returns in the commercial property market UK-wide, but particularly in London, is unsustainable in the long run.

That’s because, Brazier says, the market is relying on interest rates remaining very low in the future, while also expecting growth conditions to be favourable. Ultimately, Brazier says, that’s not going to be the case.

“At the UK-wide level, commercial property prices rest on persistently low interest rates but at the same time, they’re factoring in typical rental growth prospects and degree of uncertainty around them,” he told the audience at Imperial’s Brevan Howard Centre for Financial Analysis.

“It seems unlikely that rates can be so persistently low without either weaker growth prospects or more uncertainty.”

London’s West End, Brazier said, is a point of special interest. He described the interest rate/growth prospect dichotomy as being “particularly stark,” in the area.

“In London’s West End Office markets, the picture is particularly stark. Even if the magic combination of persistently low rates and historically typical rental prospects comes true, valuation methodologies similar to those being developed by the industry point to prices 10% below today’s level.”

Here are Brazier’s charts, from a presentation delivered alongside the speech:

No single factor can be blamed for this issue, Brazier said, arguing that a “range of underlying forces have driven down natural rates of interest, including demographics, perceived downside risks, expected productivity growth.”

“Precisely why these markets have become stretched is impossible to know for sure, but I’d caution against placing too much weight on monetary policy as the primary or underlying explanation,” he added.

The story of London’s commercial property market, was for many years, one of rampant expansion and surging prices. There is now evidence, however, that the market has moved into a downturn.

73% of surveyors responding to RICS’ quarterly UK Commercial Market Survey in October last year  said the central London market was at some stage of a downturn, while 67% of respondents said the market is overpriced.

“The feedback to the … survey reflects some of the broader macro issues, with the underlying momentum in the occupier market a little firmer further away from the capital,” Simon Rubinsohn, RICS chief economist said at the time.

Source: Uk Businessinsider