Housing stock value growth shows extent of US property market recovery

The total value of housing stock in the United States grew to a record high $29.6 trillion in 2016 with the market seen strong growth, according to the latest analysis report.

Overall the residential real estate market grew 5.7% or $1.6 trillion in value and regained what was lost during the economic crisis that followed the downturn of 2007.

The analysis from realm estate firm Zillow also shows that this is in marked contrast to what happened between 2006 and 2012 when the cumulative value of all homes in the US declined by $6.4 trillion.

Los Angeles and New York metros hold the highest shares of the country’s overall housing value at 8.6% and 8% respectively. The next most valuable metro is San Francisco worth 4.2% of the nation’s overall housing value.

However, while several markets are now more valuable than they were at the height of the housing bubble, about 60% of the markets in the US are still below the maximum values reached during the bubble years. For example, Chicago is still about $134 billion below the highest value it reached in 2006.

‘Housing is incredibly important to us personally and to the economy as a whole. The US housing stock is worth more than ever, which is a sign of the ongoing housing recovery,’ said Zillow chief economist Svenja Gudell.

‘As buying a home gets more expensive, affordability remains a concern for many, and these numbers highlight just how much people are spending on housing. The total value of the housing stock grew nearly 6% in 2016, a pace that will likely mean some American families are priced out of home ownership,’ she added.

The report also shows that renters this year paid $478.5 billion, a $17.7 billion increase from 2015. About 635,000 new renter households formed in 2016, contributing to the amount of rent spent even as rent appreciation slowed.

Apartment renters spent nearly $50 billion more than renters of single family homes, as more multifamily construction became available this year.

Renters in the New York and Northern New Jersey metros paid the most this year, spending nearly $55 billion on rent

Commercial property investment in Europe set to continue with positive yields in 2017

Investing in commercial real estate in Europe is set to continue to produce positive yields in 2017 although there are risks ahead, particularly with Brexit in the UK, a new report suggests.

Overall, European real estate markets have delivered strong returns in recent years and, although the cycle is maturing, it is far from over, according to the report from investment firm Fidelity International.

It says that the European Central Bank’s quantitative easing programme continues to encourage a transfer of capital from the periphery to the core Eurozone, and this capital is chasing high quality real assets in core Europe, especially Germany.

Attractive exchange rates versus the euro are set to draw in cross regional investors from Asia, the Middle East and North America, according to Neil Cable, Fidelity International’s head of European real estate and only macro shocks in their home markets would destabilise these flows.

He explained that in the strongest markets of Europe, especially Germany, values have been steadily increasing for the past couple of years, and this is likely to continue well into 2017.

‘Real estate fundamentals are expected to remain positive, and while QE is in place, we believe the weight of capital will extend the European, excluding the UK, investment cycle. We expect capital growth from yield compression in core Eurozone to continue, albeit at a slower pace, with prime yields likely to fall to a new accepted threshold of around 3%,’ said Cable.

‘Core, supply constrained market segments will continue to see rental growth, which should surprise on the upside as most markets report vacancy rates notably below their long term levels. We are projecting market-level total returns of around 8% to 10% for core Eurozone in 2017,’ he added.

The report points out that although European office yields edged down to 4% towards the end of 2016, reflecting the lower for even longer interest environment, they remain surprisingly high.

‘This is good news for yield hungry investors, but while capturing 4% to 4.5% yields is possible, it is not straightforward. This is the point of the cycle where the unsuspecting can encounter unwelcome risks, even when investing in seemingly safe or low risk property,’ Cable pointed out.

‘As we approach 2017, investors should retrain their focus on the underlying income in their property investments, understand the quality of the tenant companies paying the rents, and ensure good diversity of lease length and tenant type. At this point in the cycle, the chief attraction of real assets is sustainable, high quality cash flow,’ he said.

His advice is to try to avoid the hottest markets, some of which are already priced at yields of around 3% and already up to 50% more expensive than average prime property. ‘Quality yields are available outside of prime markets and now is the time to lock in to those yields,’ he added.

Cable believes that if sufficient care is taken, and unnecessary risks are avoided, a good property portfolio will see investors through the next cycle, while delivering a steady and attractive income.

UK prices could rise around 2% in 2017, depending on economy as Brexit process starts

The performance of the residential property market in the UK will depend on how the economy develops in 2017, the year the nation starts the process of leaving the European Union, it is claimed.

Modest price growth of around 2% is being forecast by the Nationwide, the second largest mortgage provider in the UK and the world’s largest building society.

Its chief economist Robert Gardner believes that what happens is intrinsically linked with the economy. ‘Like most forecasters, including the Bank of England, we expect the UK economy to slow modestly next year, which is likely to result in less robust labour market conditions and modestly slower house price growth,’ he said.

‘But we continue to think a small gain of around 2% is more likely than a decline over 2017 as a whole, since low interest rates are expected to help underpin demand while a shortage of homes on the market will continue to provide support for house prices,’ Gardner explained.


House price growth in Scotland outperforming the rest of Britain

House prices in Scotland are growing faster than in England and Wales and in October increased at their strongest rate since March 2015, the latest index data shows.

Prices increased by 1.5% month on month, taking the price of an average property to £172,561 and are now 2.9% higher than a year ago, according to the Your Move/Acadata index.

The index also shows that sales were down 3.6% in the third quarter of 2016 compared to the same period in 2015 but comfortably ahead of the two preceding years. It says that transactions have recovered strongly since their slump following the large number of purchases brought forward ahead of April’s additional 3% Land and Buildings Transaction Tax (LBTT) surcharge on second homes.

The price growth was helped by a revival in prime property in particular. Edinburgh, for instance, with an average price of £252,488 in October, had seen sales of properties in the £325,000 plus sector fall 17% in the first half of 2016 but in the third quarter they were up almost 8% on the same period last year and up 32% quarter on quarter.


Most people helped onto housing ladder by UK govt schemes are first time buyers

The majority of those helped by the UK Government’s flagship Help to Buy schemes have been first time buyers, the latest statistics show.

When they were first launched there were warnings that they would be used by people who didn’t really need help to buy a home and not the first time buyers they were created for.

But the latest data shows that of the 220,000 people who have been able to buy a home using them some 180,000 were first time buyers and the average price of a home bought was £191,000, a price regarded as being within the first time buyer range.

‘Our Help to Buy schemes are helping hundreds of thousands of people, especially first time buyers, achieve home ownership,’ said Chancellor of the Exchequer, Philip Hammond.

Although the Mortgage Guarantee scheme is due to finish at the end of this month, Hammond confirmed that the popular Equity Loan and ISA schemes will continue to ensure people can access support when buying or saving for a property.


Residential confidence helping to steady the property and construction sector

The property sector in the UK is showing resilience in the face of a tumultuous year, with confidence in the residential sector the strongest, according to new research.

Indeed, some 74% of senior executives in the in the property and construction industries surveyed by investment management and tax group Smith & Williamson regard residential property as a strong five year investment, a 10% rise from 2015.

The survey also shows that 62% are confident in the outlook for the residential sector whilst over half, some 54%, had confidence in the commercial sector.

Jacqueline Oakes, chair of the property and construction group at Smith & Williamson, said that in the face of stamp duty changes, new tax rules for buy to let and the Brexit vote the firm had expected a fall in confidence.

‘The resilience shown is encouraging and the industry appears to be cautiously optimistic about its future prospects. A growing population, the devaluation of the pound making the UK attractive for overseas residential investors, coupled with the British desire to get on the property ladder and a chronic shortage of housing in many areas, has led residential property to be seen as a shock-proof area to invest in,’ she explained.


Large number of UK landlords will stop using letting agents if costs increase

Almost half of landlords in the UK would ditch their letting agent if their profits began to fall, according to a new survey carried out a time when they are coping with considerable change in the sector.

Overall some 47% say they would forego the services of their letting agent with landlords in Scotland, the East of England and the South East most likely to do so.

But landlords in the West Midlands and the South West are most likely to stick with an agent, according to the research from the UK Association of Letting Agents (UKALA).

The research was undertaken to assess what impact the forthcoming changes to landlord tax from April next year could have on agents’ businesses and the National Landlords Association (NLA) has already warned that more than 400,000 landlords will be pushed up a tax bracket as a result of the changes, potentially forcing them to revaluate the need to employ the services of an agent.


Property prices up in England and Wales to pre Brexit vote levels

Residential property prices in England and Wales edged upward again in November with month on month growth of 0.1% in month, the latest index data shows.

The growth was driven by strong price gains in cheaper property with the average price now £295,276, according to the data from the LSL/Acadata house price index.

However, London is seeing the lowest rate of annual house price growth in the country. As recently as July this year, Greater London had the highest annual house price inflation of any UK region but in October it was the lowest, up just 0.1% over the year.

The index report says that this slowdown is the result of a significant drop in prices and transactions in prime central London property. Four out of five of the most expensive areas in London saw prices fall in the last month, led by Westminster where prices fell by 3.5%.

Year on year prices in Hammersmith and Fulham were down 13.2%, in Westminster they fell by 12.1% and in Camden were down 10.4% and the report adds that in the five highest priced boroughs in London average prices have dropped £112,950 over the year.


Value of homes in UK up 51% or £1.9 trillion since 2006

The total value of privately owned residential properties the UK has grown to over £5.5 trillion for the first time, according to new research.

In the last 10 years the total value has increased by 51% or £1.9 trillion to an estimated £5.6 trillion, a rise that has comfortably out-paced the retail price index, which rose by 33% during the period.

The data from the Halifax, one of the UK’s leading home landers, also shows that the average value per household in the UK now stands at £241,682, up from £173,837 in 2006, representing an increase of £67,845 or 39%.

The Halifax report says that this increase has been driven by a 51% rise in the average house price and the stock of privately owned homes expanding by 1.8 million from 21.3 million to 23.1 million.

More than half, some £1.1 trillion, of this rise is accounted for by London and the South East. Since 2006 the average house price in the capital has almost doubled at 98% whilst the stock of private dwellings has grown by a quarter of a million or 10%.

In the past year alone, the value of private housing stock grew by £337 billion, mainly reflecting average house price growth of 12% in the year to August.

‘The combined value of all privately owned houses in the UK is estimated at £5.6 trillion in 2016, the highest on record. A combination of higher house prices and an increase in the number of privately owned homes has seen the value of housing stock grow by £1.9 trillion in the past decade,’ said Martin Ellis, housing economist at the Halifax.

‘Overall housing equity held by UK households is in a healthy state, with total housing assets worth over £4.2 trillion more than the value of mortgage debt. Housing equity has grown by £1.6 trillion since 2006. For almost one in three home owners, who own their home with no outstanding mortgage debt, their financial position is even stronger,’ he added.

Details from the report show that the regions with highest growth in prices and the stock of private homes have seen largest value gains. There has been a healthy rise in the value of housing stock across all regions but especially in London and the South East where price growth has been the strongest combined with the largest rise in the stock of private dwellings.

The gains have been greatest in London where housing value has more than doubled at 106% from £655 billion to £1.3 trillion over the decade. The next largest increase was in the South East at 61% or £402 billion, followed by the East at 60% or £233 billion and Scotland at 51% or £114 billion.

The research also shows that the north/south gap has widened since 2006. The value of housing in southern England has increased two and half times faster than in the north at 70% compared to 27% over the past decade. As a result, the South’s share of total UK housing assets rose from 55% in 2006 to 62% in 2016.

The share of private housing wealth in London has grown from 30% to 37% during the same period. The total value of private residential housing stock in the capital is 14 times the level in Northern Ireland, which at £87 billion, is the lowest in the UK.

Overall UK housing equity remains strong with total mortgage debt a quarter of total housing value. Total mortgage debt has also grown, rising by 25% since 2006 from £1.1 trillion to £1.3 trillion. Nonetheless, the value of the private housing stock has increased by over seven times as much by £1.9 trillion compared with the £264 billion rise in mortgage debt.

The report explains that as a result housing equity, the difference between the value of the housing stock and total outstanding mortgage debt, has increased by £1.6 trillion or 60% over the decade from £2.6 trillion in 2006 to £4.3 trillion.

Regionally, there is a wide variation in the level of housing equity, with a higher balance in the south compared to northern areas. The highest is in London where housing equity is estimated at £916 billion, which is equivalent to £349,748 per household. The next largest is the South East at £830 billion or £255,965 per household and the East at £533 billion or £244,036 per household.

Outside southern England, the highest equity levels are in the North West at £307 billion, or £117,952 per household, the West Midlands at £273 billion or £139,620 per household and Scotland at £254 billion or £130,546 per household.