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Savills: Investment in Scottish real estate to reach record high

SCOTLAND has attracted more than £500 million of international capital in the first half of 2019, according to Savills.

The latest research by the international real estate advisor shows that 2019 is now on track to become the best ever recorded year for inward investment in commercial real estate in the country.

Some £575 million of international capital was invested in Scottish commercial property in the first half of 2019, accounting for 49% of all investment in the period and representing the largest share of inward capital since 2016.

Investors from Asia accounted for the largest proportion, channelling more than £240m into Scotland in 2019, surpassing the £180m invested in the whole of 2018. South Korean investors spent more than £200m, investing in some of the largest deals in Scotland. Leonardo Innovation Hub was sold to South Korean investors for £100m, with a 5.9% yield.

European investors also continued to spend heavily on Scottish commercial real estate, with almost £200m invested in the first half of 2019. The largest deal this year was to German investors, who bought 4-8 St Andrew’s Square in Edinburgh for £120m, representing a yield of 4.45%.

Head of Savills Scotland Nick Penny said the country’s attractiveness to investors is likely to increase further. “2019 is shaping up to be a record year for inward investment into Scotland,” he said. “Investors are attracted by the strong performance of the economy, record employment and more attractive yields on offer relative to other regional cities in the south east.”

“Recent plans set out by the Government to position Scotland as a forward-looking digital nation by embracing 5G has the potential to enhance Scotland’s global competitiveness and continue to drive inward investment. We are already experiencing a growth in the tech sector, particularly in Edinburgh, and with digital becoming more engrained in business processes and procedures, having a fast and reliable digital infrastructure will become increasingly vital for businesses.”

Overseas investors accounted for more than three quarters (79%) of investment, according to the latest data from Savills. The second quarter was particularly active as more than £400m of deals were completed, four times the amount in the first quarter.

Offices proved to be the most popular sector in the first half of the year with £494m transacted.

Overall, Edinburgh witnessed the highest level of investment in Scotland. A total of £316m in investment was generated through six deals, compared with five in the first half of 2018.

Glasgow and Aberdeen achieved £128m and £50m of office investment respectively. Key deals during H1 included 110 St Vincent Street, Glasgow. Savills sold the site for £48m, reflecting a 5.4% yield. Meanwhile, AB1 on Huntly Street, Aberdeen, was purchased for £13.5m, with an 8% yield, also advised by Savills.

Penny, concluded: “The fundamentals of the office market remain strong. Edinburgh is proving particularly popular due to the combination of a robust occupational market and restricted supply of high quality office space which has led to rental growth in the city. This environment is creating significant demand for office buildings with international investors that want to secure long-term income at attractive yields.”

Source: The National

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No-deal Brexit to accelerate London house price drop

London house prices could sink up to seven per cent next year if no Brexit deal is reached by the 31 October deadline date, according to the latest research.

If the UK exits the European Union with a deal London house prices will fall by a smaller 4.7 per cent, continuing the trend of declining property prices in the capital.

Research by accountancy firm KPMG published this morning shows that the average property in the capital would cost £453,000 in 2020 following a smooth exit. However, after a no-deal Brexit the average London house price would drop to £422,000.

A no-deal Brexit would trigger a drop in house prices in every region of the UK, with the sharpest fall of 7.5 per cent seen in Northern Ireland.

The latest research shows that a drop of 10 to 20 per cent is “not out of the question” if markets react “stronger than anticipated”.

KPMG chief economist Yael Selfin said: “The housing market has been stuck in the slow lane since 2016 – with the changes to stamp duty and the uncertainties of Brexit putting the market on the back foot.

“As our forecasts show, a no-deal Brexit will see house prices decline significantly across the UK in 2020 by an average of 6.2 per cent, with more severe falls of around 10 to 20 per cent also possible if we look at historic precedents.”

Last month the Bank of England’s monetary policy committee (MPC) said that if the UK’s departure from the EU is smooth and some recovery in global growth is seen it could raise interest rates “at a gradual pace and to a limited extent, as it unanimously chose to hold the main interest rate at 0.75 per cent, where it has stood since August last year.

The committee said under no deal, the “interest rate decision would need to balance the upward pressure on inflation, from the likely fall in sterling and any reduction in supply capacity, with the downward pressure from any reduction in demand”.

In July, MPC member Gertjan Vlieghe said the bank might have to slash interest rates to nearly zero in the event of a no-deal Brexit.

By Jessica Clark

Source: City AM

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The government to review national model for shared ownership

The government will review a new national model for shared ownership to make it easier for people to buy more of their own home, including allowing them to buy in 1% increments.

Housing Secretary Robert Jenrick (pictured) said that this is among a raft of measures to help people on lower incomes get onto the housing ladder.

Jenrick said: “Building the houses this country needs is a central priority of this government. We know that most people still want to own their own home, but for many the dream seems a remote one.

“My mission is to increase the number of homes that are being delivered and to get more young people and families onto the housing ladder, particularly those on lower incomes.

“That’s why I am announcing radical changes to shared ownership so we can make it simpler and easier for tens of thousands trying to buy their own home.

“Help to buy, the cut to stamp duty and our home-building programmes are already making a real difference, but I am clear we need to go much further if we are to make the housing market work.

“I will be looking at ensuring young people from Cornwall to Cumbria aren’t priced out of their home areas and how we can build public support for more house building and better planning.

“This government will help a new generation to own their home.”

At present, borrowers have to buy an increased share in 10% chunks which can be as much as £45,000 per time.

This process of increasing the stake until the property is bought outright is known as ‘staircasing’.

People use shared ownership to buy a proportion of their home which can be as little as 25% then pay a subsidised rent on the rest.

The Housing Secretary also said he will look to reform the planning system to increase housing delivery and make home ownership more affordable for people looking to buy their first property, particularly in areas which are least affordable.

This could include increasing the number of homes sold at discounted prices to people trying to get onto the property ladder, boosting homeownership and helping build local support for new development.

Homeowners buying a property under help to buy will be given new freedoms which will make it easier to take out a 35-year mortgage.

The government has also closed a loophole with immediate effect that prevented people from taking out a mortgage with a term of more than 25 years.

Ross Hunter from Post Office Money added: “It’s important that we take steps to enable people from a variety of economic backgrounds to find routes on to the housing ladder.

“In 2018, a first-time buyer household income in the UK was £48,289 on average, and the average cost of a property in the UK was £282,713 – it can take years to save for a deposit and 69% of first-time buyers will depend on additional help from their loved ones to save the necessary funds.

“Any step to support people on lower incomes in their journey to realise their aspiration of owning a home is welcome.”

Marc von Grundherr, director of Benham and Reeves, said: “The latest changes to shared ownership are a novel idea from Robert Jenrick but as we’ve seen before through the likes of Help to Buy, an idea that will further fuel demand rather than address any real supply imbalance.

“While helping those in shared ownership will provide a leg up to some, the 200,000 homeowners in this position account for less than one percent of UK properties.

“Reducing the barrier to homeownership via shared ownership properties doesn’t supply more homes and it will be interesting to see if any concrete strategy on doing so comes from this latest government rhetoric.”

By Michael Lloyd

Source: Mortgage Introducer

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New build price premiums hit 108% in parts of the UK

How does the cost of a new build home compare to existing housing stock and where are the highest new build property premiums?

Using the latest data from the Land Registry, estate agent Springbok Properties, has found that the current average price of a new build property is £290,176, compared to £224,729 for existing properties, a mark-up of 29%.

The highest premium was found in Scotland with new builds costing 41% more than existing homes, dropping to 36% in Wales, 27% in England and 25% in Northern Ireland.

While it may be expected that a brand new property will carry a higher price tag recent research found that 40% of new-build homeowners were unhappy with the quality of their property.

Highest premiums
The worst town for new build premium is Harlow in Essex where the average new build costs £551,089, which is 108% more than the average cost of £265,249 for existing stock.

Blaenau Gwent is the next worst area, with a 96% mark up between the new build price of £182,313 and the price of existing property (£92,814).

Gravesham in Kent ranks third with a 95% new build premium while Preston in Lancashire is also home to a new build premium of over 90%.

Rochford and Torfaen in Wales are both home to a premium of 88%, followed by Middlesbrough (85%) and West Dunbartonshire in Scotland (85%). Caerphilly and Merthyr Tydfil complete the top 10 worst areas for new build property price premiums in the UK at 81% and 80% respectively.

For once London home buyers aren’t the focus of bad news and on average the difference in price for a new build and an existing property in the capital is just 3%. Newham is the borough home to the largest gap at 38%, with Redbridge (35%) and Barking and Dagenham (33%) also ranking high.

Shepherd Ncube, founder and CEO of Springbok Properties, said: “While there are many new builds that will be delivered to the standard expected, the thought of forking out way above the odds for a property that falls way below standard is a nightmare scenario for the nation’s homebuyers.

“As the figures demonstrate, in some areas, new build properties are going for a hefty market premium and this isn’t confined to one or two locations, it’s the length and breadth of Britain at a range of market values.

“Of course, if there is a need for housing at a higher price band or quality in any area it should be built. However, one has to question the consistent failures of many property developers when delivering these homes to the standard promised while still charging such a high price compared to the rest of the market.”

By Kate Saines

Source: Mortgage Finance Gazette

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Number of property transactions decrease

Property transactions decreased for both residential and non-residential in July, according to the latest statistics from HMRC.

The UK property transactions statistics report shows that non-residential and residential property transactions saw a 5.8% and 12.4% year-on-year decrease respectively.

The provisional seasonally adjusted UK property transaction count for July was 86,630 residential and 9,760 non-residential transactions.

Declining transactions began at the end of 2007 after the financial crisis, prior to this transaction counts had risen steadily reaching its peak in mid-2006.

Kevin Roberts, director at Legal & General Mortgage Club, said: “Our research shows only one in ten borrowers plan to delay buying or selling as a result of Brexit, so it’s clear there are other barriers preventing a boost to transaction levels.

“While government schemes have helped thousands of first-time buyers onto the property ladder – we need to think about those further up the ladder too.

“To stimulate the market, the government needs to build more housing across all types of tenure.

“This will provide second steppers and last-time buyers with more choice and in turn, families can up or down-size accordingly.”

Mark Harris, chief executive of mortgage broker SPF Private Clients, added: ’HRMC reveals a further slip-sliding of transactions compared with the same period last year as buyers and sellers continue to put big decisions like moving house on hold.

“For those who are brave enough to take the plunge, or who have simply had enough and want to get on with it, mortgages remain incredibly cheap.

“With fewer transactions happening, lenders are having to compete harder for business. With the exception of 10-year money, Swap rates have ticked up with three, five and 10-year swaps now cheaper than their two-year equivalents.

“Compared to where swaps were three months ago, lenders have been able to reduce their rates, and to some extent, maintain or make better returns.’

Gareth Lewis, commercial director of property lender MT Finance, commented: ’While HMRC is reporting nothing as dramatic as transactions falling off a cliff, the picture for the housing market is not that rosy either.

“However, one would expect a seasonal lull – it will be interesting to see where these numbers are at the back end of October and whether we get the bounce back that you would expect at that time of year.

“It is not all doom and gloom: as a lender we are reasonably busy – getting enquiries in and money out of the door, which are two barometers as to whether things are going ok.

“What is interesting is the spike in commercial property transactions, suggesting investors are diversifying into other areas.

“There isn’t enough detail here about what these transactions are but more activity is encouraging none the less.”

By Jessica Nangle

Source: Mortgage Introducer

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Is the UK property market ready for a land value tax?

For years, there’s been growing talk in politics of introducing a new land value tax to replace the old system of council tax and business rates. It even featured in the Labour party’s manifesto at the 2017 general election.

The principle is self explanatory: A land value tax is a tax on the value of land. That’s different to the current system because it only taxes the land and doesn’t take into consideration the value of the buildings that sit on it, whereas council tax and business rates both do.

This makes the current system a particularly acute problem for businesses because it disincentivises productive investment in improving property or buying heavy machinery, for example. If you make any improvements to your business’s commercial buildings, it will lead to higher rates.

It’s a similar argument with council tax, which is banded by property value. In theory, making home improvements and adding value to your property should lead to higher council tax. However, in practice, council tax bandings have not changed in nearly three decades — though a revaluation is often mooted.

A land value tax theoretically removes this problem of taxing productive investment, which could result in greater economic activity, more jobs, and wealth creation. Another advantage is that because there is essentially a fixed supply of land, taxing it does not mean you get less as a consequence, unlike, say, taxing the production of manufactured goods.

Campaigners for a land value tax say it would result in more efficient use of the land by removing the current penalties for development. They also argue this tax would help deter speculators from hanging on to land because they would face a regular levy, encouraging them to develop it or sell it.

This is how the system would work in practice: an assessment of a land’s market value then a tax levied on the landowner calculated as a percentage of that value, perhaps annually.

“Properly applied, land value tax would support a whole range of social and economic initiatives, including housing, transport, and other infrastructural investments,” according to LandValueTax.org. “It is an elementary fiscal measure that would go far towards correcting fundamental economic and social ills.”

Not everyone agrees. In a critique of the land value tax, the pro-market think tank Adam Smith Institute wrote that opportunity cost is already a significant incentive for owners to use their land productively.

“If you choose to use your land as a garden instead of a block of flats to rent out, you are ‘paying’ the cost of doing so in the rent you’re forgoing,” the ASI wrote. “Adding an additional tax to that would make things less efficient even if it raised GDP numbers — a bit like taxing leisure time, it would increase cash output at the cost of actual wellbeing.”

The debate will continue. But it’s worth understanding the land value tax and the arguments around it because it is now on the table in British politics. After the next election, you might find yourself paying it.

Source: Yahoo Finance UK

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Mortgage approvals increase but gross lending falls

The number of mortgage approvals for home purchases and remortgages increased in April, according to new figures from UK Finance.

Data published today revealed approvals by the main high street banks were 5.4% higher in April 2019 than in the same month of the previous year.

For home purchases, this figure was 8.6% more year-on-year and for remortgages it was 2.2% higher than in April 2018.

In the same period gross mortgage lending in the residential market was £20.3 billion, which was a fall of 1.4% year-on-year.

John Goodall, CEO of Landbay, said: “Mortgage lending remained subdued, and reflected the wider challenges facing the housing market.

“Lenders are having to push down mortgage rates for customers even as funding costs begin to rise, which has led to banks like Tesco bowing out of the market altogether.”

He added that while prices had started to stabilise, until there was clarity on the current political situation it was unlikely there would be any drastic rise in confidence, and subsequently, lending.

Meanwhile, Richard Pike, sales and marketing director of Phoebus Software, said the correlation between the gross mortgage lending figures, which were down, and the number of approvals, which were up across the board, was quite telling.

He added: “As house prices fall, especially in London and the south east, and house buyers also look farther afield into more affordable areas, this gap is only likely to widen.

It is, however, encouraging to see the increase in approvals for home purchase, which does show that people have had enough of sitting on their hands and are making their move.”

Product transfers

UK Finance also revealed 290,000 homeowners switched product with their existing provider in the first quarter of 2019, a decrease of 1.7% year-on-year.

In terms of value, it said this represented £39.2 billion of mortgage debt refinanced internally, which was an increase of 2.1% compared to the same quarter last year.

According to UK Finance, of the total number of product transfers in Q1 of 2019, 161,100 were on an advised basis – a rise of 8.6% year-on-year. These were worth £22.7 billion, an increase 15.3% year-on-year.

Execution-only product transfers went down by 12.1% year-on-year, to 128,900. These were worth £16.5 billion, a decrease of 11.8% compared to the same period last year.

By Kate Saines

Source: Mortgage Finance Gazette

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Properties selling at slowest rate for five years as market slump continues

The property market is moving at its slowest rate for five years, Home.co.uk claims.

Analysis of listings data from the property website found the median time on the market for May is 89 days – 11 days longer than the same month last year and the slowest rate for this time of year since 2014.

Time on the market – defined as the period between listing and sold subject to contract – is now at its slowest rate in ten years for London at 96 days.

Supply continues to fall, with new instructions down 9% year-on-year across the UK and down 28% in the capital, while total stock levels are up just 1.7%.

This malaise has seen asking prices increase just 0.5% on a monthly basis but fall 0.2% annually to £307,521.

Doug Shephard, director of Home.co.uk, said: “Uncertainty is a highly corrosive factor for the economy. Decisions are postponed indefinitely, projects put on hold and normally bold actors become cautious in the midst of the unknown.

“The Brexit mess may not hamper the purchase of a pair of jeans, but the housing market is severely affected because the stakes are so high.

“Key factors such as cost, importance of timing and the irreversible commitment involved in a home purchase make the current economic environment almost unbearable for the average buyer or seller.

“Uncertainty in the market moves the ‘invisible hand’, a term coined by Adam Smith to describe the unobservable market force that helps the supply and demand of goods in a free market to reach equilibrium.

“That equilibrium is vital for price recovery but is currently being undermined by a growing crisis of confidence in the housing market, especially in Greater London.

“While evidence of falling demand is widespread across the UK, in London both supply and demand are collapsing, and this is causing an acute distortion of the market.

“Price fluctuations during such episodes are to be taken with a pinch of salt. Low volumes lead to extreme volatility in several key market price indicators.

“Take the Halifax and Rightmove indices, which are showing wild variations from month to month and adding to confusion in the marketplace.”

By MARC SHOFFMAN

Source: Property Industry Eye

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Brexit calls for landlord flexibility

Brexit is having an impact in the rental as well as the for-sale market. Concerns are growing over changes to regulation; dips in property value; possible interest rate hikes meaning rents will have to increase, affecting affordability for tenants; and the ambiguity around having EU nationals as tenants.

But amidst this turbulence is an opportunity for landlords to bring some stability to the rental sector and move forward with the evolving tenant. While the waiting game on Brexit continues, we can look at how to be more effective and responsible as landlords overall.

PPP Capital has been developing and renting property for over 15 years, but in the past few years we have had to think more creatively in the face of Brexit uncertainty about our approach to the evolving tenant. Below is a list of suggestions we have found effective in attracting and retaining good tenants and we are confident this approach will help our portfolio weather whatever Brexit brings.

Move forward with tenants’ changing profile: For example, many tenants are now pet owners. Landlords are often reluctant to accept pets, but we give applying tenants the chance to describe their pet before we decide whether to accept. We also suggest putting a clause in the contract about having pets in the property. In our experience, if we show flexibility and care as a landlord, we receive the same respect in return.

Engage in efficient two-way conversations with tenants: One way to do this is to use property maintenance software that updates tenants in real time. Making them feel connected to their landlord eliminates rounds of calls or emails and speeds up simple maintenance requests, but also builds trust between both parties.

Enabling your company, tenants, contractors and tradespeople to access it separately and simultaneously makes things easier for all involved. A digital maintenance log also helps you to see if properties are costing more than was forecasted.

Be open to installing high quality finishes and extras: More tenants than ever envisage themselves as long-term tenants rather than homeowners. For a landlord, this means tenants will give extra care to the property, treat it more like their own home and stay for years. So it is often worth investing in some ‘extras’ such as smart home systems, underfloor heating or safety features such as alarm systems and great outdoor lighting.

Give back to the community: One way to do this is sponsor a local community initiative or help to create an outdoor communal area or park nearby. This is an idea we have started exploring but not yet implemented. We have donated to national charities but also want to identify projects in communities where we have developments.

Our priority is to identify opportunities that support a greener, brighter future for the communities we are present in.

Renters’ needs are evolving. Property selection and the decision to stay for the long-term are not only determined by the basics but by a landlords’ attitude to diverse tenants and how responsible they are as a landlord. There are ambiguous times ahead, but private and corporate landlords with mid-to long-term buy-to-let and build-to-rent properties should remain very optimistic about the future.

Let’s focus on the long-term yield while doing our best to be responsible landlords with solid portfolios occupied by respectful tenants.

By Sanjeev Patel

Source: Property Week

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The best and worst places to sell your home in Britain

Scotland is the best place to sell your home quickly in Britain, with homes in some parts of the country taking less than four weeks to go under offer, according to a new report.

Zoopla found Edinburgh and Falkirk have the fastest-moving property markets in Britain, with homes in the two locations getting snapped up in just 27 days.

This is against Scotland’s average of 42 days and a nationwide average of 56 days.

Across the UK, average selling times by region are:

  1. Scotland, 42 days
  2. West Midlands, 46 days
  3. East Midlands, 47 days
  4. Yorkshire and the Humber, 54 days
  5. South-west England, 56 days
  6. North-west England, 57 days
  7. East of England, 59 days
  8. Wales, 60 days
  9. South-east England, 61 days
  10. North-east England, 67 days
  11. London, 70 days

Scotland, where the average home costs £192,147, dominated the fast movers, taking the top four spots. Glasgow, where properties sell in about 31 days, and Stirling, where they go in 32, come in second and third, respectively.

And in Cardiff and Coventry, sellers manage to get rid of their homes in about 37 days.

The fastest-moving towns and cities in Britain are:

  1. Edinburgh and Falkirk (tied), 27 days
  2. Glasgow, 31 days
  3. Stirling, 32 days
  4. Cardiff and Coventry (tied), 37 days
  5. Newport, 40 days
  6. Nottingham and Birmingham (tied), 41 days
  7. Birmingham, 41 days
  8. Mansfield, 42 days

“The key is to get your pricing correct, meaning the best way to sell your home quickly is to ask for its true value given the current market,” Annabel Dixon, a spokesperson for Zoopla, said. “Over-priced homes won’t shift and may have to be discounted and on the flip side nobody wants to sell for less than their property is worth.”

At the other end of the scale, Blackpool has the slowest property market in Britain. Homes in Blackpool typically take 71 days to go under offer, Zoopla found.

However, London was hot on its heels. Properties in the capital remain listed for about 70 days before an offer is made, reflecting the subdued state of its housing market and stretched affordability, with the typical property costing £659,660.

Newcastle has the third-slowest property market, with homes taking an average of 68 days to sell, followed by Hemel Hempstead at 65 days. Homes in Bradford and Reading both took 64 days to sell.

The slowest moving towns and cities:

  1. Blackpool, 71 days
  2. London, 70 days
  3. Newcastle-upon-Tyne, 68 days
  4. Hemel Hempstead, 65 days
  5. Bradford and Reading (tied), 64 days
  6. Preston, 63 days
  7. Telford, 62 days
  8. Doncaster, 60 days
  9. Swansea, 59 days

By  Abigail Fenton

Source: Yahoo Finance UK