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Will the coronavirus epidemic harm UK property prices?

With current turbulence in equity markets, some investors who sold out of stocks and currencies last week are looking around for alternatives. UK property, which has been severely depressed due to the uncertainties around Brexit last year, looks like it could be one of them. UK house price growth continued its upward trend in the months immediately succeeding the election – in January UK house prices were up 1.9% year on year.

This was the largest increase in 14 months and beat December’s number of 1.4%.

At London estate agent Benham & Reeves, there is notable new interest in the market. It reports a higher total number of transactions so far in Q1 than in the past 112 months, which represents a dramatic upswing in interest. It is a trend being seen elsewhere in the housing market.

“Investors should be looking at fixed-return and less risky alternative investment options,” says Yann Murciano, CEO at BLEND Network. “We have already seen investors liquidating their equity positions and looking for alternatives that provide steady yield.”

BLEND Network is a peer-to-peer property lending marketplace that connects lenders directly with borrowers and focuses on lending to established property developers. Lenders can lend from GBP 1000 to property-secured loans and earn up to 15% p.a.

Murciano thinks that the coronavirus will undoubtedly affect the London property sector, but says the worst of the impact will be restricted to the international buyer and luxury property market focused on Prime Central London real estate. Outside the capital, property prices are less volatile and he sees a growing pool of local, specialised developers who can deliver projects with strong investment potential.

There is still a shortage of housing supply in the UK

The UK continues to suffer from an under-supply of low cost housing and there are now a number of funds and platforms that are addressing the appetite from investors for strategic allocations into that sector.

But what sort of impact can we expect from coronavirus on the UK property sector?

The Royal Institute of Chartered Surveyors (RICS) has polled surveyors in the UK, asking them about what they expect to see in terms of the effects of the virus. Activity in the housing

market was up in February, but much of the economic effects of the coronavirus have really only been felt since the beginning of March. It may be we see a delay of sellers putting houses onto the market at the same time as buyers and investors are looking for new opportunities.

The recent decision by the Bank of England to cut rates should not be discounted either. This will make mortgages cheaper and with the additional and very dramatic stimulus measures announced, will have a positive effect on the UK economy in the medium term. This could create a situation where we have more buyers than sellers in this market, with knock on consequences for house prices.

Another factor has been the introduction of stamp duty at 2% for overseas buyers of UK property, announced in the UK budget last week, which will apply from April 2021. This will apply in England and Northern Ireland and is intended to take some of heat out of UK property from foreign investment. That said, it means there is now a closing window of opportunity for foreign investors in UK property. This could create demand at a time when the property market would otherwise be running out of steam.

Source: The Armchair Trader

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Halifax: House prices up 2.8% annually

House prices increased by 2.8% in the year to February, according to Halifax’s house price index.

On a monthly basis, house prices increased by 0.3%.

Looking at the data on a quarterly basis, house prices rose by 2.9%.

Russell Galley, managing director, Halifax, said: “The UK housing market has remained steady heading into early spring.

“Much like we saw in January, the increases seen in February reflect the continued improvement of key market indicators.

“The sustained level of buyer and seller activity is strong compared to recent years, with positive employment conditions and a competitive mortgage market continuing to support demand.

“Looking ahead, there are a number of risks, including the potential impact of coronavirus, which continue to exert pressure on the economy, and we wait to see how these will affect housing market sentiment later in the year.”

Ben Johnston, director of off-market property app Houso, added: “House prices are on a continued upwards trajectory, but it remains to be seen how much of an impact the unexpected hurdle of Coronavirus is going to have on the market.

“The Bank of England could feasibly follow the Federal Reserve with a rate cut to help markets and shore up the stagnating economy in an effort to prevent other businesses going the way of FlyBe.

“Next week’s Budget gives the government the chance to stimulate growth further by reducing stamp duty although this might not be enough until the Coronavirus has stabilised and the threat has diminished.

“That all-too-precious confidence, which is so important for the market, is hanging in the balance.”

Lucy Pendleton, founder director, James Pendleton, said: “It’s no surprise to see continued healthy price growth like this. Demand and supply have both been rebounding recently but, so far, the number of new buyers is definitely outpacing the return of sellers.

“Coronavirus impacted our business for the first time on Wednesday, stealing away a sale that was just days from exchanging.

“The buyer worked in the events industry which is being rocked by large numbers of cancellations. He was unfortunately one of the employees told his job was at risk, forcing him to pull out of the purchase completely. The hope is this will remain an isolated case, but the impact of the virus will become clearer in March.

“For now, with valuations still rising and competition for certain properties still fierce, buyers have begun to put in offers on multiple properties in a bid to secure an option before stalling over exchange of contracts in case something better comes along. This could create an unappealing log jam and put more completions at risk if Covid-19 starts to become a major factor.

“Despite the newspaper and TV screens being peppered with images of people wearing face masks and plastic bottles on their heads, there’s still a huge appetite to move, and buyers and vendors have so far refused to put their searches on hold.”

By Jake Carter

Source: Mortgage Introducer

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Houses cost millennials 14 times more than baby boomers

Average property prices have risen twice as fast as wages in the UK over the past four decades, according to a new analysis of official figures.

Millennials looking to buy a home face prices that are now at least 14 times higher than when baby boomers tried to get on the property ladder in the late 1970s. But average wages have risen at less than half the pace of runaway house prices in recent decades, rising less than seven times over since 1979.

Analysis of official data by digital broker Mojo Mortgages and Yahoo Finance UK reveals the stark contrast between the generations in the property market.

A baby boomer born in the 1950s could buy the typical British home for about £16,800 in 1979, if they were able to get on the ladder as buyers often did in their 20s. The average home only cost just under four times the average pay packet, with the typical worker taking home around £4,200 a year.

But millennials looking to buy now, at an average age of 33, face a far greater gap between incomes and prices. The average home is now more than eight times higher than average wages.

The average property sold for around £235,300 last year, according to data from the Land Registry. Meanwhile typical pay packets came in at just over £29,000 last year, according to the Office for National Statistics (ONS).

British workers have seen a significant squeeze on pay particularly since the financial crisis, with younger workers among the hardest hit. But property prices continued to rise after the crash, and are now climbing once more after a recent slowdown.

The growing disparity helps explain why home ownership rates have been on a downward trend over the past decade, despite a recent uptick. Average buyers also now take on proportionally larger debts than previous generations, with only getting on the ladder because of competitive mortgage lending and historically low interest rates.

Mojo Mortgages combined the official data with estimates of spending habits, deposits and debts to show how getting a mortgage appears to have become harder over the decades.

The broker released the findings to mark the launch of its new online MortgageScore tool, aimed at showing would-be buyers how likely they are to get a mortgage.

Buyers are given a score out of 1,000. The tool suggests the average buyer in the 1970s would notch up 808 points, but chances have deteriorated with each decade. The typical worker in the 2000s scored 508, falling even further to an average of 410 last year.

Richard Hayes, CEO of Mojo Mortgages, said: “Home ownership is a top life goal, but for many first time buyers these days, it’s something they feel they won’t be able to achieve anytime soon.”

By Tom Belger

Source: Yahoo Finance UK

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House prices return to pre-financial crisis levels

House prices across English cities have risen above pre-Financial Crisis peaks for the first time since 2007, the latest research has found.

Property in Central London recovered to pre-crisis levels in just 2.3 years, the fastest of all UK cities, as overseas buyers entered the market attracted by a weaker pound.

Oxford and Cambridge followed the capital, returning to 2007 levels at 3.7 and 3.9 years respectively.

Newcastle was the last city to exceed pre-crisis house levels, only registering recovery in late December last year, according to the Zoopla UK Cities House Price Index.

Meanwhile, London’s house prices grew two per cent from January 2019 to last month, and all English cities have recorded annual house price inflation of at least two per cent per year for the first time in two years.

Richard Donnell, director of research and insight at Zoopla, said: “While it took 12 years for all English cities to return to pre-Global Financial Crisis levels, the central London market returned to this level in just 2.3 years.

“The subsequent decrease in the value of sterling created a window of opportunity for overseas buyers to secure competitive value in high value markets and, since then, house prices in London have rebounded by almost 60 per cent, outstripping all other UK cities.

“Today London’s growth is more moderate, slowly ticking upwards at two per cent per annum. We do not expect the annual growth rate to accelerate further as affordability pressures limit buying power.”

Data by the Office for National Statistics published last month showed that London house prices jumped 2.3 per cent to £484,000 in December after the Conservative election win.

Across the UK house prices increased 2.2 per cent on an annual basis, and reported an increase of 0.3 per cent on a month by month basis.

By Jessica Clark

Source: City AM

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Are house prices about to surge again?

Spring seems to have come early for the UK housing market. The Royal Institution of Chartered Surveyors’ survey reported a sharp rise in new buyer enquiries and house price expectations in January. New instructions for house sales are rising at the fastest pace in over six years. House price inflation has edged up in the last couple of months.

The recent stirrings follow a period of sluggish housing activity. The rebound in house prices and activity which started in 2013 hit the buffers in 2016, the year of the EU referendum. The Halifax measure of house price inflation dropped from a year-on-year peak of 8.8% in the spring of 2016 to a low of 0.9% last October. House prices in London have grown far slower than the national average in the last three years, a development which has made housing in the capital marginally more affordable relative to incomes.

Yet over a longer period the picture is of house prices far outstripping general inflation and earnings. Since 2000 the Halifax measure of UK house prices almost tripled while earnings have risen by less than 80%.

A recent Bank of England working paper argues that the rise in house prices in this period can be largely attributed to the effect of lower interest rates. A lower discount rate raises the present value of an asset, thus raising house prices. (The same process has done wonders for equity prices.) But the relationship works both ways. The model developed by the author of the Bank paper suggests that a sustained increase of 1% in long-term interest rates could lead to a 20% fall in house prices.

The triple shock of disinflation, credit liberalisation and quantitative easing helped power UK house prices. It is a remarkable combination, but one that seems unlikely to be repeated in the next 20 years.

Of course housing demand has also risen due to the growth of single person households, immigration and greater longevity; the number of English households has increased by 13% since 2000. Given the deterioration in housing affordability and rising concerns about housing shortages it is, perhaps, surprising that the official data show that the number of dwellings in England has increased at a rather faster rate than the number of households.

This is less reassuring than it might seem. There are acute regional housing shortages, evidenced by soaring rents in London. And the quality of the housing stock is hotly debated. UK housing is ageing, prompting LSE academic Paul Preston to declare that houses “are akin to Cuban cars: they are still in use but they are clapped out and polluting”. We will return to the question of housing supply in a future Monday Briefing.

Looking ahead, it seems plausible that the government’s post-Brexit migration policy, coupled with very low unemployment rates in central Europe, will slow the rate of growth of migration. Meanwhile housing supply is picking up from the lows seen in the wake of the financial crisis.

Sentiment in the housing market has perked up. But the tailwinds which drove a vertiginous rise in prices over recent decades are weakening. The scope for substantial reductions in interest rates has diminished. A period of rapid growth in immigration may be drawing to an end. Expanding housing supply seems, once again, to be a political priority. The double-digit house price inflation of the decade before the financial crisis looks increasingly like another world.


Source: Reaction

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House prices rise across all UK regions for first time in two years – Land Registry

House price growth ended 2019 at an all-time high for the year, Land Registry figures show.

The December 2019 Land Registry House Price Index showed that average property prices ended 2019 up 2.2% annually to £234,742.

Today’s Daily Mail has splashed the story as its front page lead, attributing the house price rises to the Boris bounce – although the data relates to deals agreed much earlier than the general election, and probably in September or before.

Many commentators yesterday also attributed the boost in prices to the so-called post election ‘bounce’.

All parts of the UK saw prices grow annually for the first time in almost two years, according to the Land Registry.

Annual house price growth was strongest in Northern Ireland where prices increased by 2.5% over the year.

Prices were more subdued on a monthly basis, up just 0.3%.

The latest provisional sales volume data from the Land Registry for October showed transactions decreased by 0.8% annually in both England and Wales, increased by 2.7% in Scotland and rose by 5% in Northern Ireland.

Gráinne Gilmore, new head of research at Zoopla, said: “The pick-up in annual price growth reflects the trends seen in Zoopla’s UK Cities House Price Index, which recorded the highest level of house price inflation in two years for December 2019.

“Zoopla data shows an increase in buyer demand since late last year, a trend that is set to continue amid real wage growth and low interest rates. However, in some areas there is still a shortage of homes coming to market to meet this demand.

“The upcoming Budget is a prime opportunity for the new Chancellor to address some of the factors affecting the housing market at present. Any review of Stamp Duty charges to help the movement of home owners up and down the property ladder would be welcome, but the extent and nature of any reform, which must be balanced against political exigencies, remains to be seen.”


Source: Property Industry Eye

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House prices increase across whole of UK for first time in nearly two years

House prices increased annually across the UK’s nations and regions in December, for the first time in nearly two years, official figures show.

The average UK house price was £235,000 in December, £5,000 higher than December 2018, figures released by the Office for National Statistics (ONS) and Land Registry show.

For the first time since February 2018, all regions saw positive annual growth.

ONS head of inflation Mike Hardie said: “Annual house prices grew across all regions of the UK, the first time this has happened in nearly two years, with London seeing its strongest growth since October 2017.”

Average house prices increased over the year in England to £252,000 (a 2.2% rise), Wales to £166,000 (2.2%), Scotland to £152,000 (2.2%) and Northern Ireland to £140,000 (2.5%).

In England, growth ranged from 1.2% in the South East to 3.9% in Yorkshire and the Humber.

London prices increased by 2.3%, accelerating from 0.4% in November and a 1.2% fall in the year to October.

The report said the sharp rise in London may reflect a shift in the type of properties being sold, with more high value homes potentially changing hands as a result of wider considerations relating to Brexit and other financial issues.

Sales of very high value properties in London can have a knock-on effect for average prices across the capital.

Purchases of very high value properties may be particularly affected by considerations such as uncertainty, including around the effects of the UK’s withdrawal from the EU, expectations of actual or potential tax changes, and other factors, the report said.

In December, average prices were £574,800 in inner London and £429,500 in outer London.

Lawrence Bowles, senior research analyst at Savills, said: “This index measures values at the time a sale completes.

“The process of buying a home takes time, and generally the deal is agreed a month or more before the completion date.

“That means most of the transactions covered in these December figures were agreed before the general election.

“We’ll have to wait for the January figures to see if there’s real evidence of the post-election bounce in values to match the undoubted improvement in buyer sentiment across the market.”

He continued: “All eyes will be watching the London numbers, where house prices are right up against the limits of affordability and where sentiment has been particularly impacted by political and economic uncertainty.”

Howard Archer, chief economic adviser at EY ITEM Club, said housing market activity could get a further lift if the Government introduces measures aimed at it in the forthcoming Budget.

He said: “However, the economy still looks set for a pretty challenging 2020 and there will still be appreciable uncertainties, including on the UK-EU relationship front – so that the upside for house prices in 2020 is likely to be limited.”

David Westgate, chief executive at Andrews Property Group, said: “For all regions to have delivered positive annual growth for the first time in nearly two years highlights just how resilient the UK property market has been against a backdrop of extreme political uncertainty.

“There’s a definite sense that the property market has turned a corner and is shaking off its post-EU referendum anxieties.”

Jeremy Leaf, a north London estate agent and a former residential chairman of the Royal Institution of Chartered Surveyors (Rics), said: “These figures reflect what was happening in the months leading up to the (general election) so only show a more solid resilience in activity in what was still quite a turbulent period.”

By Vicky Shaw

Source: Yahoo Finance UK

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The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn’t going to happen.

We got proper confirmation of a post-election bounce in the housing market this morning.

Asking prices and housing market activity rose sharply during the past month, according to property website Rightmove.

So is this a “sugar high” from all that pent-up demand? Or is something more fundamental underpinning all this?

The election relief rally is a short-term driver for house prices…

Rightmove reckons that the average asking price for a house in the UK is now standing at more than £309,000. That’s just about matching the previous record high set in June 2018.

Meanwhile, the property website says it has seen a 7.2% jump in traffic compared to the same month last year, while agreed sales were up by 12.3% across the UK, and 26.4% in London.

Now, you have to take Rightmove with a pinch of salt. Asking prices are aspirational. A seller can ask what they want for their house – the question is, will buyers pay up?

But like it or not, Rightmove can at least indicate sentiment. And if buyers feel comfortable about setting higher prices, and their agents are relaxed enough about the number of sales they’re getting to encourage them to do so, then it indicates a hotter market.

Also, the Rightmove data is hardly an outlier. The most recent RICS (Royal Institution of Chartered Surveyors) report suggested that buyer demand across the UK is rising at its fastest rate in more than four years.

So what’s going on?

Clearly the leap in activity – particularly in London – is at least partly driven by people deciding that, with the election over, they can go ahead with previous plans.

There’s probably an element of buying from overseas investors too. Anyone who thought the sterling “Brexit discount” would vanish rapidly will have been disappointed. But there’s no doubt that Britain is less politically unstable than it has been since mid-2016.

These are short-term factors. They are purchasing decisions that were delayed and that are now going through.

Does that mean the bounce will fizzle out before long? Or are there other factors that could keep it going?

… but maybe there are some longer-term drivers pushing higher too

Perhaps a better question is this: why did the UK housing market fizzle in the first place? Why did London in particular, take such a big hit over the last four or five years?

And the answer is this: because the government made it more expensive for landlords and overseas buyers to purchase houses.

House prices are primarily driven by one simple thing: the cost and availability of credit. Those dictate the level of buying power in the market. And far more than anything else – yes, including physical supply of property – buying power is what drive house prices.

The cost of buying for landlords specifically has been driven higher in the last four years by regulatory changes. As a result, landlords have been a diminished force in the market.

However, it looks as though those changes might be reaching a trough. The FT cites a statistic from estate agent Hamptons International, which found that the number of private landlords has dropped to its lowest level in seven years. That’s no surprise given the changes to the market.

However, on the other hand, a record proportion – 30% – of the remaining landlords now own more than one home. That’s the logical result of the private housing rental market being forcibly professionalised.

For “amateur” or “accidental” landlords, the carrying cost of a house has become too great. It is no longer feasible to run a buy-to-let as a low-hassle second income stream. But for landlords for whom it’s a business, it’s worth the effort to stay in the market and also to incorporate (owning the properties through a company means you can retain some tax advantages).

If we’re just about through with the impact of the tax changes – and if competition in the buy-to-let mortgage market is picking up (which it is) – then the headwind created by the great landlord exodus may now be past its worst.

The risk is that house prices keep going higher

So where does that leave us?

At the end of the day, if you want to see house prices stagnate or decline (which would be healthy, given how expensive they are), then it needs to become harder or more expensive, or both, for a significant group of buyers to raise the money to buy a house. That’s what happened to landlords and caused much of the stalling in the last five years.

The problem (for anyone who’d rather avoid another boom and bust, which is the big risk) is that there’s no sign of mortgages getting more expensive. You can argue that there’s not much room for them to get cheaper, but that’s only partly true.

Interest rates are at rock bottom levels, for sure. They could fall a bit but unless the economic data deteriorates an awful lot, that seems unlikely. But in boom times, banks compete on other things. Remember the 125% mortgage? Yep, that’s the sort of thing I’m talking about.

I’m definitely not suggesting you go out and buy a wee house somewhere as an investment. That’s a headache, and something to look at as a business decision rather than a punt on house prices.

What I am saying is that there’s a danger that house prices become a political hot button once again, after a brief period in which it looked as though we might get some respite in the market.

That would be bad news – particularly if the government decides that a bout of rising prices would encourage the “feel-good” factor again. You’d like to hope that they’ve learned their lesson – but let’s keep a close eye on the budget (whenever it might happen now) for any housing market measures in the vein of “Help-to-Buy”, just in case they haven’t.

By: John Stepek

Source: Money Week

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RICS: Continued improvement in market activity

The January 2020 RICS Residential Survey results show continued improvement in market activity over the month as demand, sales and fresh listings all move further into positive territory.

In terms of new buyer enquiries, 23% of survey participants reported an increase in demand during January compared to the 195 recorded in December.

Agreed sales rose for a second month in succession at the national level, evidenced by a net balance of 21% of respondents reporting an increase.

New instructions coming into the market also increased during January, with 19% of contributors noting a rise, with 20% of respondents also reporting that the level of market appraisals undertaken over the month was higher than a year ago.

Despite the positive figures, average stock levels on estate agents’ books remain very low when placed in a historical context.

House price inflation gauges moved into positive territory in both London and the South East during January.

Northern Ireland and Scotland currently display the strongest growth in house prices across the UK.

Rob Barnard, director of intermediaries at Masthaven, said: “Industry sentiment seems to have improved as we start the year, with borrowers clearly pushing ahead with their homeownership aspirations now greater clarity around the political climate has been restored.

“Innovation from the mortgage market has helped to maintain credit availability for consumers.

“First-time buyers especially are profiting from the current low-rate environment to secure high loan-to-value products at favourable rates.

“However, we can’t just stop there. We need to capitalise on growing positive consumer sentiment and continue to offer products which cater to the modern-day consumer.

“As we continue into 2020, the industry needs to ensure later life and self-employed borrowers also benefit from increasingly flexible and innovative products and rates.”

The survey suggests that house price inflation will gather pace, with respondents anticipate prices increasing across all parts of the UK during the next 12 months.

Over half of contributors (56%) report that sales prices are still coming in below asking, which is a decline from 67% in October 2019.

Adrian Moloney, sales director of OneSavings Bank, added: “Whilst there are some positive signs that confidence is returning to the market, helped by historically low rates and healthy competition in the 5-year fixed buy to let mortgage arena, there is still plenty of work to be done on all fronts to bring the housing market back to full health.

“With the upcoming budget in March, buyers and sellers will be looking for tangible commitments from the government to address the dwindling levels of housing stock.

“House building must be central to the government’s plans in order to cure the systemic supply/demand issue and enable more people to get onto, and move up and down the property ladder.

“The prospect of a new housing minister in the expected cabinet reshuffle could also add further impetus to fixing the challenges in the market long-term.”

In the lettings market, 24% of respondents cited an increase in tenant demand with landlord instructions reported to have fallen by 13% of contributors.

Rents are expected to increase over the next three months.

By Jessica Nangle

Source: Mortgage Introducer

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UK Property Prices Surge at Fastest Rate for 2 Years


  • Annual property price growth in the UK rose to 4.1% in January 2020, the highest rate of growth recorded since February 2018
  • Prices in January increased by 0.4% month-on-month, with market commentators attributing the growth to a ‘Boris bounce’ following the UK’s general election and EU withdrawal
  • Increased activity in the market underlines the rising level of confidence amongst buyers and investors

It’s been a good start to the year for the UK’s property investors.

You may have heard some commentators referring to a ‘Boris bounce’. And it seems that ever since the outcome of December’s general election, which saw Boris Johnson’s Conservative party win a strong majority, there’s been a significant rise in activity in the UK property market.

Now Halifax has revealed its latest index figures for January 2020, revealing that average property prices increased 0.4% from December 2019.

It means that the UK’s annual rate of price growth has now reached a two-year high of 4.1%

This data followed similarly positive figures published by Nationwide at the end of January, which stated that price growth measured by its index is now at a 14-month high.

It seems that, with a new government decided and with the 31st January’s Brexit deadline passed, more buyers and investors are returning to the market. Furthermore, it also suggests that there was a high level of ‘pent up’ demand from those who were waiting to make their next move in the market at the end of 2019.

Russell Galley, Managing Director of Halifax, explained: “A number of important market indicators continue to show signs of improvement. We have seen a pick-up in transactions with more buyer and seller activity consistent with a reduction in uncertainty in the UK economy.”

“Looking ahead, we still expect a moderate rate of house price growth over the course of the year. Demand is likely to continue to exceed the supply of properties for sale across the UK, with the subdued pace of new building also adding to upwards price pressure.”


Source: Select Property