Substantial Rental Growth Found Outside of the Capital

UK renters are increasingly looking outside of London, as the capital’s rental market reaches an affordability ceiling.

Your Move’s latest buy-to-let index shows rents across England & Wales averaged in February.

In London, however, the exodus of renters looking outside of the capital for more affordable accommodation has resulted in slower rental growth, with rents declining 1% year-on-year and 0.5% from the previous month to an average of in February.

Similarly, the rental market in the South West also saw pressure ease in February, as rental properties reached a surplus in the region; rents in the area reduced by 1.5% year-on-year, with the average price now standing at pcm.

Tenants in Wales, on the other hand, saw rents surge the quickest over the month, with the average property letting for in February – a 7.7% annual increase.

A monthly reduction saw rental returns slide by 0.1% from January to an average of 4.1% across England and Wales.

The highest rental returns were found in the northern regions of the North East & North West, where average returns stood at 5.3% & 5% respectively, in February.

Conversely, landlords with properties in the South East and South West saw rental return fall below 4% in February, following a year-on-year decline.

The news follows Knight Frank and IHS Markit’s latest publication, which found that property owners continued to remain positive about the UK property market in March.

International Buyers to Drive Commercial Property Investment in 2017

Investors from overseas are expected to be the dominant force in the UK commercial property market this year, says a new survey.

Investors from overseas are expected to be the dominant force in the UK commercial property market this year, says a new survey.

The decline in the value of sterling, following the UK’s decision to leave the European Union last June, and the strength of the dollar have been key factors in seeing rising demand in recent months, according to the survey from the Royal Institution of Chartered Surveyors (RICS).

With confirmation from the Prime Minister that the UK will also be leaving the European single market, the wave of interest seen from overseas investors in the final quarter of 2016 is expected to continue.

Whilst the majority of the UK has seen demand increase, London’s commercial market has seen growth slow, said respondents, as the market anticipates the potential departure of firms from the city following Brexit.

The survey revealed that 18% of respondents believe that there are companies in their region considering relocation, dependent on the nature of the UK’s post-Brexit deal.

Despite the prevalent concerns, the survey also indicated that demand from international investors is expected to remain high, with 28% of respondents stating that they anticipate an increase in property values over the next year – driven by overseas buyers.

Earlier this week, consultancy group Arcadis announced that enquiries from China increased by a third in Q4 2016, as far eastern investors look to capitalise on weak sterling, with interest set to continue this year.

Commenting on the results of the survey, RICS chief economist, Simon Rubinsohn, said:

‘… the commercial property market is continuing to attract investor interest despite ongoing concerns about pricing in the capital and the prospects for the economy more generally. Indeed, the feedback RICS has received is consistent with a renewed appetite from overseas buyers for UK assets.’

Last week, Deloitte revealed that construction companies are increasingly focusing on the UK’s regional cities, in order to meet demand from investors exploring their options outside of the capital.

Rental Growth in Southern Regions Outshined by a Rising North Once More

A new rental index has revealed that rents across regions in the North of the UK grew at a faster rate than in the South over the course of December.

Analysing the UK’s private rented sector, tenant referencing firm HomeLet found that rents grew most quickly in Northern Ireland, the North East & Scotland, rising by 6.4%, 4.9% and 3.8% respectively.

Comparatively, the Greater London region, the South East and the South West experienced more modest growth of 2.0%, 1.7% and 1.6% – significantly lower than in the North.

Greater London, in particular, experienced much slower annual rental growth following the Referendum in July last year when compared to 2015. However, rental values in the capital remain significantly higher than the rest of the UK, with average rents in December standing 69% above the UK average at PCM.

The southern regions, which saw rental inflation rise considerably in the first half of 2016, experienced a ‘more marked pull-back in the second six months’ said HomeLet in a separate press release, indicating that rents in these areas could be facing an affordability ceiling.

 

HomeLet’s findings are echoed by earlier research from property investment platform Landbay, which showed that rents grew the fastest in the Midlands & North across the last 5 years.

Manchester to Lead Northern Powerhouse Growth for 2017-19

Economic growth in the North of England will be led by Manchester over the next three years, according to new research.

The global service provider, Ernst & Young Global Limited (EY) released their latest growth projections, with Manchester’s Gross Value Added (GVA) set to increase by 2.0% between 2017 and 2019 – surpassing the UK average by 0.5%.

EY states that the city is set to experience the second largest employment growth of all of the locations covered in their report, with work opportunities set to increase by 0.7% over the three-year period.

The projections follow EY’s forecasts of a 3.0% increase in GVA for Manchester throughout 2016, significantly outpacing the 1.2% rise seen in the north west and the national average for this year of 2.0%.

The report highlighted how substantial investment in modernising Manchester city centre made over the course of the last decade, in addition to the financial backing given to the city’s infrastructure, have had a positive impact on the city’s reputation and has served as a catalyst for further growth.

The UK’s growing technology sector has also played a key role in the rise of new economic hubs such as Manchester and Leeds, with companies from around the world expressing interest in investing in these areas through new industries.

Earlier this week, former Chancellor, George Osborne, restated the government’s commitment to the Northern Powerhouse following the announcement of various new housing initiatives throughout the North of England.

EPH2 Launched

Empire Property Holdings was incorporated as a special purpose vehicle, to acquire commercial properties for development into residential accommodation by the Developer, Empire Property Concepts.

Empire Property Holdings is born out of Empire Property Concepts. Empire Property Concepts was set up by Director, Paul Rothwell, in September 2009.

Having already completed his first property investment at University & developed a portfolio with his brother Adam, Paul wished to make his property development formal as a company but also seek investors to provide his services to.

Empire’s progress has been strong, even against the backdrop of difficult economic & property market conditions respectively. The company has continued to market itself well & attract new investors to aid its growth.

Since its inception Empire has grown the product offering to consultancy, Joint Ventures (JVs) and Loans for Property. The latter is used to facilitate the development of projects to be retained as an investment within a special purpose vehicle, and then refinanced to return investors funds.

Empire seeks to market to new investors, and deal with the administration & development cost collection only. Empire has also expanded its team in terms of management, build management, accounts & administration.

Empire is currently developing & managing properties for Paul, his family, DPIL & DPDL, & private consultancy clients. He currently has 600 units under management to include the various aforementioned portfolios & consultancy clients.

Empire has recently developed a 25 unit permitted development conversion called Britannia Inn in Balby, Doncaster, 12 months after acquisition.

EPH2 Investment Profile

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Halifax House

Development 2 – Halifax House

A commercial to residential conversion via full planning permission which will create 65 one bedroom & two bedroom apartments. The development will provide private letting accommodation in a prime location with parking.

  • £1,250,000 – Purchase
  • £2,275,000 – Development
  • £3,525,000 – Total Cost
  • £456,300 – Income (65 x £135 x 52)
  • £5,700,000 – Value based on 8% yield
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Globe Works

Development 1 – Globe Works

A former mill to residential conversion via full planning permission, which will create 24 one bedroom, 90 two bedroom & 10 three bedroom apartments.

  • £1,700,000 – Purchase Price
  • £6,200,000 – Development Cost (124 x £50K)
  • £7,900,000 – Total Cost
  • £1,024,800 – Income (24 x £600 x 12) + (90 x £700 x 12) + (10 x £800 x 12)
  • £12,800,000 – Valuation based on 8% yield
  • £8,960,000 – Refinance exit (70% LTV)

Commercial Property Values Increase for First Time Since Brexit

The UK’s commercial property sector saw slight growth in capital values in October, according to a new property index.

The monthly UK commercial property index, published by CBRE, demonstrated that the capital values for the commercial real estate sector rose by 0.1% last month – the first monthly growth since the UK’s decision to leave the European Union in June.

Industrial property led the increase, rising 0.2% over the past month, with the retail and office sectors remaining flat at 0% growth in October.

The index utilises capital value metrics which assess the market based on the price that a property would likely have achieved on the date of the valuation.

Commenting on the results, Miles Gibson, head of research at CBRE, said: ‘This month’s results suggest continuing stability within the market in October. Occupiers and investors continue to take stock of the current conditions but many sectors remain resilient to Brexit-related uncertainty for now.’

The report also highlighted the stability of rental value in the commercial sector, with the overall market remaining stable as rises in retail and industrial properties were balanced by the decrease in office rents.

In the wake of Brexit, the commercial property sector was one of the most impacted with a number of commercial property funds closing to avoid volatility in the face of market uncertainty. Since then, several of the largest asset managers have re-opened the funds, as the market has achieved greater stability.

The rise in commercial property values mirrors the growth seen in the residential market as confidence returns to the property market following the initial hesitance seen post-Brexit.

Earlier this week, Halifax revealed that house prices had also risen in October, with an increase of 1.4%.

Savills: UK Rental Market to Outgrow House Prices

Rental rates are projected to rise at a much faster rate than house prices by 2021, according to new research.

 

The UK rental market is expected to grow by an average of 19% across the UK over the next five years – providing significantly higher growth than the 13.1% projected for the UK housing market over the same period.

Leading the rental rate increases will be Bristol, where rents are expected to rise by 27.5% over the next five years, with London rising by 24.5% and the cities of Manchester and Birmingham achieving a 17% growth.

The report highlights that these locations, with their knowledge intensive and high tech economies, in addition to their world class universities and wider cultural significance, are beginning to open up the range of opportunities for young professionals beyond the capital – a significant driver behind the projected rental growth.

Commenting on the projections, Lawrence Bowles of Savills Research, said:

‘Rental growth will slow next year because of the tightening affordability and the effects of Brexit. Greater uncertainty, higher inflation, and a weak pound will impact how much households can spend on rents. However, the barriers to home ownership remain high. Renting will remain the tenure of choice for younger households.’

House prices are also expected to see an increase over the next five years, but at a more modest rate. Savills stated that they expect prices to remain steady for 2017, before seeing increases achieved in the four subsequent years totalling a 13.1% rise in 2016 prices.

The projections from Savills match the forecasts from investment management company Jones Lang LaSalle, who also predicted growth of 13.1% over the next five years.

New Legislation Approved: Lower Rates of Stamp Duty for Student Property

Having received Royal Assent on the 15th of September, the Finance Act 2016 will come into force as a law in the UK, excluding student accommodation from the higher residential Stamp Duty rates.

 

 

In March’s Budget announcement, former Chancellor George Osborne announced a new tiered system for Stamp Duty on residential property, which saw purchases on second homes and buy-to-let properties under become subject to a 3% levy surcharge – a law in place since April 1st 2016.

 

According to the Finance Act 2016, however, purchases of specifically designated student property will not be subject to the same tiered system for Stamp Duty as residential properties; since these types of dwellings are now being classified as commercial properties instead.

 

The new legislation will benefit investors of student accommodation, with this group now exempt from the Stamp Duty surcharge on properties below the mark.

 

Those purchasing student pads under will pay no surcharge as the current rate for these types of properties stands at 0%.

 

Last month, the University of College Admissions Service revealed the largest number of applications ever recorded for the 2016/17 academic year, with the number of university positions offered to students increasing by 3% from the previous year to nearly half a million.

Record Foreign Investment in the UK

The UK has experienced record breaking investment from foreign businesses over the course of the last financial year.

 

The newly appointed International Trade Secretary, Liam Fox, announced that in the year to April 2016, there were a total of 2,213 investment projects made by international companies in the UK – an increase on 11% on the previous year.

Figures from the Department for International Trade stated that a total of 116,000 jobs have been created or safeguarded over the past year, bringing the total number of jobs created in the UK through foreign direct investment since 2010 to almost 390,000.

Commenting on the figures, Mr Fox said: ‘These impressive results show the UK continues to be the place to do business.

‘We’ve broadened our reach with emerging markets across the world to cement our position as the number one destination in Europe for investment.

‘This continued vote of confidence in the UK will help attract foreign investment to create jobs, security and opportunities for people across the UK.’

In line with the continued plan for the creation of a new Northern Powerhouse region, the greatest increase in investment was found across the North of England.

The North West saw an increase of 118% year-on-year, whilst the North East and Yorkshire and the Humber saw a rise of 83% and 66% respectively.

The biggest increase in terms of job roles was seen in the Midlands, where a total of 14,797 jobs were created between April 2015 and April 2016.

With more than 570 projects, the US has remained the largest provider of new projects within the UK, with China and India following suit with a total of 156 and 140 projects each.

Released today, the figures do not provide coverage of the period following the UK’s decision to leave the European Union, but deals such as the sale of ARM Holdings to Japanese firm Softbank, completed for bn last month are indicative of a willing market for UK property.