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UK mortgage approvals for new house purchases tumble despite growth in remortgaging

The number of mortgages approved for house purchases was almost five per cent lower in August compared with the same time last year, providing fresh evidence of flat activity in London’s property market. Despite the fall in new mortgage approvals, remortgaging soared 9.2 per cent during the month, as a rising number of homeowners looked to lock in more favourable deals ahead of expected higher interest rates.

However, the mortgages approved for people buying houses were down 4.2 per cent year-on-year, underlining a continuation of subdued activity in London’s housing market.

Meanwhile, gross mortgage lending for the total market in August was £24.1bn, falling 1.2 per cent lower than a year earlier, according to today’s UK Finance figures.

Jeremy Leaf, north London estate agent and a former Rics residential chairman, said: “At first glance these figures look quite encouraging but when you appreciate that a substantial part of the increase in lending is to do with remortgaging in anticipation of higher interest rates, the picture is not so rosy.”

Leaf added: “Mortgage approvals for house purchase are lower compared with this time last year, which was not a particularly impressive time anyway. Clearly, the market remains fairly flat without too much movement one way or the other, which is reflected on the high street.

“Confidence is in short supply unless new market conditions are recognised. Having said that, we are seeing more viewings and more realism as the summer period is now behind us. It is now up to sellers to recognise that the market is unlikely to change for the better for some time.”

The news comes despite recent Bank of England data showing that mortgage lending picked up in the second quarter of the year, with new commitments hitting their highest level in more than a decade amid a bump in the number of first-time buyers coming onto the property market.

Peter Tyler, director at UK Finance, said: “Remortgaging continued to dominate in August, as homeowners took advantage of a competitive market to lock into attractive deals. Growth in card spending remained fairly strong, reflecting the boost to retail sales from the warm weather as well as the growing use of credit cards as a preferred means of payment.

“However, the overall economic outlook remains mixed as household incomes continue to be squeezed by rising inflation.”

Source: City A.M.

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UK commercial property outstrips even most bullish expectations

Offices in the UK continued to see strong takeup in the second half of 2017, as the commercial property sector smashed expectations.

But the performance of retail property was less positive, according to UBS Asset Management’s report, which predicted that the high street will continue to suffer from changes to shopping habits.

Overall, the total return from UK commercial real estate in 2017 was 10.3 per cent, outstripping even the most bullish of expectations.

Demand for offices held up, increasing by 19 per cent on 2016. This segment was given a major boost by the presence of the serviced office sector in London, in particular WeWork.

But the retail sector is still facing headwinds including consumer confidence, meaning demand is slowing for traditional shops. The report also suggested that the spate of company voluntary agreements (CVAs) in recent months could shift the power balance away from property investors in the sector.

New Look, Byron, Jamie’s Italian, and Prezzo have all entered into the process to restructure their portfolios, asking some landlords to agree to rent reductions and closing some sites.

But there is a bright spot in industrial space, which UBS says has a growing role in the increased levels of home delivery. Rents on smaller warehouses in South London are thought to have increased a whopping 50 per cent over the last year due to the demand for last mile fulfilment.

Total returns for the logistics property sector reached 21 per cent last year, and returns are expected to be maintained at an average of 7.7 per cent for the next two year period.

Source: City A.M.

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UK property total returns break 10% for 2017

UK commercial property total returns hit 10.2% at the end of November, to already sit ahead of the IPF’s consensus forecast of 8.5% for 2017 as a whole.

CBRE’s latest monthly index found that total returns for November were 1% as the industrial sector out-performed the metrics to give a 0.5% rise in capital values and 0.2% rise in rental values month-on-month overall.

Industrial capital value growth again was the top performer in November, at 1.5% and South East industrials slightly drove this with an increase of 1.6%. Rental value growth in the industrial sector was 0.5%, with the South East again slightly outperforming the rest of UK at 0.6% and 0.2% respectively.

The retail sector also recorded capital value growth, hitting a figure of 0.2% in November while retail warehouses slightly outperformed the other subsectors for the second consecutive month with growth of 0.3% as shopping centre capital values high street shops in the South East both saw no growth.

In the office sector, capital values rose 0.2% despite the City submarket recording a decrease of 0.1% and both the City and West End & Mid Town submarkets reported a decrease in rental values in November at -0.1% and -0.2% respectively.

Miles Gibson, head of research at CBRE UK, said: “UK property has performed steadily and above expectations in 2017 so far, with total returns now in double digits. Industrials continue to lead the way.”

’Robust’ 2018 outlook

CBRE’s accompanying 2018 Market Outlook predicts that the market will continue to perform solidly “despite political unknowns”. They project that property investment volumes will be roughly the same in 2018 as in 2017 although total returns to property are expected to be drop to around 4%.

Gibson added: “While some property sectors will see extremely patchy growth performance [in 2018], the rise and rise of industrials & logistics looks likely to continue, and the ‘beds sectors’ like hotels, built-to-rent and healthcare are also set to grow strongly. Whilst significant risks remain, from reduced consumer spending power, changes to US interest rates and the Brexit denouement, we anticipate robust investment volumes in the property sector in 2018.”

Source: Property Week