Global Appetite for Real Estate Assets Due to Increase

Public sector investors plan to increase their exposure to real estate assets over the upcoming year

Independent think tank the Official Monetary and Financial Institutions Forum (OMFIF) has surveyed chief investment officers and reserve managers at 31 public sector institutions, such as central banks and sovereign funds, with total holdings estimated at $33 trillion.

Of the respondents, 24% intend to increase their allocations of real estate assets over the next 12 months and 37% aim to invest into infrastructure, whilst 36% plan to cut their share of government bonds.

The research highlights investors’ continued search for ‘real assets’, or assets that are illiquid and deliver steady, predictable returns, as opposed to more traditional instruments for capital growth, which tend to be more vulnerable to volatility, such as equity markets.

Writing in the OMFIF report, former president and CEO of the Federal Reserve Bank of Atlanta Dennis Lockhart, said investors’ shift in focus towards new asset classes “is a trend likely to persist for some time”.

David Green-Morgan, Global Capital Markets research director at JLL, also remarked on the results, claiming that with more investors opting for stable returns over volatility, the scale and variety of opportunities will continue to expand.

“[…] We have seen the nature of real estate investing broadening in developed market to encompass student housing, aged care, data centers and other niche sectors”, he noted.

“This has been more challenging in emerging markets, where much of the increase in investment has been into the traditional sectors, although residential development is one sector that has proved popular across all markets.”

Housing Stock Hits 40-Year Low

The UK’s housing shortage is being exacerbated by an absence of houses being listed on the UK property market, according to the latest index from the Royal Institution of Chartered Surveyors (RICS).

 

Average stock levels for estate agents fell to just 42.53 houses per branch in June – the lowest level recorded since January 1978.

 

Down from the 43.1 seen in May and less than half of the peak 90.95 seen in May 2008, those surveyed emphasised that the current political climate in the UK, and the country’s relationship with Europe, remain at the forefront of sellers’ minds.

 

Despite causing an initial downturn in stock availability last year, the effect of Brexit has started to subside according to RICS’ data, with 27% of those surveyed indicating that the two-year negotiation period was the main issue for sellers.

 

However, the UK’s parliamentary wrangle following last month’s General Election was seen as a leading factor in the falling number of houses available, with 44% of respondents stating that this was the main reason for homeowners electing not to sell at this time.

 

RICS’ chief economist, Simon Rubinsohn, emphasised that the UK’s ongoing political uncertainty was going to continue to have an influence over both stock and transaction levels as the market moves forward.

 

‘Transaction levels … are flat-lining,’ said Rubinsohn. ‘[They] may continue to do so for a while, particularly given the ongoing challenge presented by the low level of stock on the market.’

 

The UK’s continuing shortage of stock is helping lower priced areas of the country with house price growth, said Rics, with a new geographical divide in rising property values now emerging.

 

Whilst the South has traditionally led the UK’s increases, the market is currently seeing the South begin to plateau, as the North continues to rise.

 

‘The latest results demonstrate the danger, however tempting, of talking about a single housing market across the country. RICS indicators, particularly regarding the price trend, are pointing towards an increasingly divergent picture,’ said Rubinsohn.

Projections Revised, UK Economy to Grow More in 2017 GDP growth for the country is expected to reach 2% next year, according to think thank

The National Institute for Economic and Social Research (NIESR) cited an upswing in exports, following Sterling devaluation, together with higher wage increases as indicators that the UK economy will see higher-than-expected rise over the next six months – reaching a GDP growth of 2% in 2018.

The revised forecasts call for the Bank of England to revert last year’s interest rate reduction earlier than initially projected, with the cost of borrowing anticipated to increase next spring, as opposed to 2019’s Q2.

A rise in interest rates is necessary to protect high street banks from another financial crash by supporting their efforts to boost profits, said NIESR’s director Jagjit Chadh, who also advocates that a healthy financial sector is crucial to encourage business prosperity.

The research follows the Bank of England’s base rate reduction seen in 2016, as a post-Brexit emergency measure, a drop from 0.5% to 0.25% – the lowest level in the institution’s 323-year history.

Further commenting on the projections, Jagjit Chadh said:

“This rate increase should not be seen as a tightening in policy, but instead as a modest withdrawal of some of the additional stimulus that was injected into the economy after the 2016 EU referendum.”

Later this week, the Bank of England is expected to provide its own conclusions on the strength of the UK economy in its quarterly inflation report.

Quest for Cheaper Property Values Sees London Exodus Increase

Nearly 300,000 people have moved away from the capital in the year to June 2016

Analysis by property agency Savills show that Londoners of all ages are increasingly moving out of the city, as property prices climb to new levels.

Whilst the city has continued to experience population growth, with latest estimates totalling 8.8 million in mid-2016, this increase has been accentuated by births and migrant influx.

Departures, on the other hand, are said to be reaching their peak.

Statistics show a NET movement of 93,000 people out of the capital for alternative locations across the UK in the year to June 2016 – up 80% from five years earlier.

Driving the exodus are those in their 30s, with net departures from this group reaching 34,500 over the same time frame, 68% higher than in the year to June 2011.

Although, property price growth represents a key contributor to this trend, with London households finding homes cheaper by relocating, renters in the capital are also feeling the pressure of price increases.

This trend is already having an impact on house price growth in regional cities, with the latest analysis by Hometrack indicating that leading regional hubs across the UK are experiencing greater increases than in the capital.

UK Remains Top Target for Wealthy Commercial Property Purchasers

The world’s ultra-high net worth individuals are turning to the global commercial property market as a leading source of investment, according to new research – with the UK standing as the top choice for investors.

 

A report from global property agent Knight Frank has found that private wealthy individuals are becoming an increasingly powerful bloc in commercial property investment, with 26% of all transactions in the market in 2016 seeing involvement from private investors.

 

The market share, which excludes any real estate holdings that are classed as primary residences or a second property, is the highest on record.

 

As the influence of the ultra-high net worth individual continues to exert itself over the commercial property market, the UK emerged as the location where private property investors are most likely to invest, buoyed by the markets strong fundamentals.

 

Andrew Sim, head of global capital markets at Knight Frank, stated that ‘tenant demand, liquidity and transparency’ remain priorities for private investors looking to capitalise on the world’s top markets, such as the UK.

 

Knight Frank identified that 24% of wealthy individual portfolios now consist of real estate assets, offering the ability to diversify their investments on both a portfolio and geographical level.

 

Providing investors with the option to choose location, asset class, tenants and management approaches, the flexibility and specificity of real estate has been a significant factor in the growing interest from individual investors.

 

‘We predict that private investors will continue to take global market share as both the number of wealthy individuals and their assets grow,’ said Anthony Duggan, head of capital markets research at Knight Frank.

 

‘Increasingly we are advising clients not only on prime office, retail and hotel assets but also strategic investments in growth sectors such as urban logistics, leisure and specialist operating assets including student housing and multi-housing,’ added Mr Sim.

Predictably Unpredictable: Q2 2017 Market Analysis

The Unforeseen Becomes Routine

Following Brexit, Trump and Macron, the world of politics continues to spin on its axis, with the establishment of a new status quo continuing in 2017.

After Theresa May finally triggered Article 50 at the end of Q1, the relatively definitive notion of beginning negotiations with the EU appeared to be the only political tightrope on the horizon.

But the Prime Minister’s Brexit agenda meant she had one more trick up her sleeve.

Calling a snap election in order to further her Parliamentary majority, Mrs May found her confidence misplaced after seven weeks of campaigning left her Conservative party without a definitive majority and with fewer seats than they started with, resulting in a Hung Parliament.

Foiled by the unlikely ascendancy of Jeremy Corbyn and his Labour party, the PM was forced to turn to Northern Ireland’s Democratic Unionist Party (DUP) to forge the alliance needed to form a new government.

With the details of the DUP deal still being ironed out and Brexit talks now underway in Brussels, Theresa May’s minority government will need some early wins at home and abroad to prevent further uncertainty and economic slowdown – as well as avoiding another trip to the polls later in the year.

 

The Uncertainty Impact

Cutting across the usual contradictions of the property industry’s varying house price indexes in Q2 was one clear message – house price growth in the UK is beginning to slow.

Official figures showed that the prices continued to rise in April, with property values averaging more than across the UK. However, rival mortgage lenders Halifax and Nationwide both agreed that the growth gap is narrowing, with annual increases dipping slightly in April and May.

Heightened uncertainty, rising inflation and increasing affordability pressures in certain areas of the country are amongst the factors identified by the firms as being behind the deceleration of the market.

By contrast, forecasts compiled over the quarter by global estate agency Savills, show the UK’s purpose-built student accommodation sector will see another buoyant year – achieving an estimated bn in investment by the end of 2017.

The sector’s counter cyclical characteristics and rising rents continue to capture the interest of overseas purchasers, who were found to have nearly doubled (64%) their investment share in the UK’s student market in 2016.

 

UK Property Marches On

As the world watches with bated breath to see how the UK will navigate its way through Brexit, the decision to leave the European Union has failed to quell the appetites of both domestic and international buyers in Q2.

The UK’s historical reputation as a strong safe haven for property has emerged unscathed from the current political climate, with a new survey revealing that a third of respondents still intend to invest in the UK market, driven by the sector’s strong historical performance.

Assessing buyer intentions across five key international markets, a separate survey from IP Global found that the UK remains a target destination due to its strong market fundamentals and favourable exchange rates – attracting, in particular, investors from Singapore.

The enduring popularity of UK property amongst investors from around the world demonstrates that, despite all its current challenges, long-term prospects remain bright for the UK property market.

Election 2017: UK Vote Results in Hung Parliament

The Conservative Party fails to secure definitive majority after election

UPDATE: 09/06/17 13:30

Theresa May and the Conservative Party are set to form a minority government with the assistance of Northern Ireland’s Democratic Unionist Party (DUP).

Following a closely fought election – and with one constituency yet to be declared – the Conservatives stand 8 seats short of achieving the 326 MPs needed to form a majority government alone.

Following a boost of votes in Northern Ireland, the DUP has entered into an informal arrangement with the Conservatives, to give the two parties a majority of 7 in the House of Commons.

Speaking to the press shortly after asking the Queen for permission to form a minority government, Prime Minster Theresa May, said:

‘What the country needs more than ever is certainty, and having secured the largest number of seats in the General Election, it is clear that only the Conservative and Unionist Party has the legitimacy and ability to provide that certainty by commanding a majority in the House of Commons. As we do, we will continue to work with our friends and allies in the Democratic Unionist Party in particular.’

 

Election 2017 PrinvestUK

 

The vote of the British public has seen the UK wake up to a hung parliament this morning – with no single party securing enough seats to win an outright majority.

The Conservative party has emerged as the largest party in the UK, at the time of writing gaining a total of 317 seats across the UK – but failing to secure the majority mandate that party leader and prime minister Theresa May was looking to achieve when she called the election seven weeks ago.

Labour experienced a significant surge in the polls, building on the number of seats they achieved in the 2015 General Election, to see 261 MPs elected and once more establishing Jeremy Corbyn’s party as the largest opposition in Parliament.

With Theresa May still seeking to secure her position at the head of the next government, and with two seats still to be declared at the time of writing, the Conservatives cannot mathematically reach the 326 seats needed to form a majority government alone and will need to form an arrangement with another party to secure that figure.

Elsewhere in the UK, the Scottish National Party (SNP) secured their place as the UK’s third largest party, with 35 seats gained in Parliament. However, the election marked a substantial loss of seats for the party, with 19 of the constituencies won in 2015 being lost to the Conservatives, Labour and the Liberal Democrats.

Tim Farron’s Liberal Democrats saw a total of 12 MPs elected to Parliament, Plaid Cymru secured a further seat in Wales to bring their total to 4 and the Green Party retained their single seat as co-leader Caroline Lucas extended her majority.

In Northern Ireland, the Democratic Unionist Party (DUP) were able to increase their share in Parliament to 10 seats, whilst Sinn Fein rose to 7 seats.

With Brexit negotiations due to begin later this month, the formation of any government by Theresa May is expected to settled swiftly in the coming days, with the DUP emerging as the likely candidates to form a coalition government in the wake of the election.