UK property market report (November 2009)
Mixed economic signals but growth to return and strengthen next year Signals about the health of the UK’s economy and the wealth of its property owners are somewhat mixed. All the recent main house price indicators show an increase with the trough in the market having occurred at the beginning of this year. But, this news has been tempered with unexpected negative GDP figures for the third quarter showing the UK is still in recession. Understandably, this economic uncertainty will impact on the market for overseas homes.Although the third quarter economic figures are a setback, the Bank of England in its latest inflation report predicts, based on positive underlying statistics, a return to growth by the beginning of next year expanding to 3.75 per cent by the end of 2011. This recovery is considerably faster than forecast recently.
However, although the general economy is in recession, the bonus culture has returned which will enable those benefiting to fund discretionary purchases, such as properties abroad. The downturn as a whole seems to have had little effect on the overseas property purchase and emigration plans of wealthy individuals, according to the UK’s premier removals company, Abels Moving Services, by appointment to HM the Queen. Although the firm has seen a significant drop in UK sales in the last 12 months, it reports no change in overseas moves for the same period.
The UK's economy shrank by 0.4 per cent in the third quarter of this year. This has been attributed to poorer than expected performance of the service sector. In contrast, house prices rose by 2 per cent in October 2009 year-on-year with monthly increases of 0.4 per cent, according to the Nationwide, a leading mortgage provider. Another leading lender, Halifax, reported for October 2009 that house prices had increased by 2.9 per cent since the end of 2008, with the year-on-year price drop slowing to - 4.7 per cent. A positive September monthly growth of 0.9 per cent, the fifth month in a row, was revealed for the third quarter by the Land Registry with London and the South East leading the price increases. Mortgage approvals in September rose to the highest level since March 2008, according to the Bank of England.
Some analysts are expecting the market to slow as gaining unemployment, tax rises and interest rate increases impact on demand. Estate agent, Knight Frank, forecasts prices to fall in 2010 with a concerted recovery not starting until 2012. But London and southern England, particularly at the top end of the market, are expected to perform more strongly and recover earlier.
However, UK investors are gradually returning to international property, attracted by low prices combined with the perception that the bottom of the market has been reached in many areas in the world, according to some agents.
There has been particular interest in Self Invested Personal Pension (SIPP) funded purchases of apart-hotels, which as they are classified as commercial property are allowed under government regulations. Stock market uncertainty and low interest rates have also driven interest in property as an investment, but buyers are insisting on value in markets that are perceived to have bottomed out.
Although the general economy has been weak, sections of the UK’s global finance business are reporting profits with a return to bonus payments, for example investment bank Goldman Sachs has recently announced bonuses for staff. The figures indicate that salary and bonuses for its London employees will average £350,000 this year. Recipients of these bonuses, high net worth individuals, who are mainly based in London and the South East, will be interested in high-quality property overseas, particularly in the more stable markets.
Sources: www.news.bbc.co.uk www.propertywire.com
About Chelgate
Established two decades ago, Chelgate is a highly respected international public relations company, headed by one of the world’s most distinguished international PR professionals, Terence Fane-Saunders. Headquartered in London, with offices in Belgium and Romania, and a network of associates across the world, Chelgate is one of the leading overseas destination PR firms, and is particularly respected for the promotion of new and second home properties to the UK, Ireland and mainland European markets. The firm works for developers, property agents and other consultants promoting property destinations from Canada to Malta and Malaysia to the Philippines. These firms bring their business to Chelgate because they know our reputation for delivering results. Chelgate has also been involved in a number of sensitive projects working for public agencies promoting areas in the UK, including London, both nationally and internationally.
UK property market report (July 2009)
Market commentary
Although the UK market for overseas homes dropped sharply towards the end of 2008 and during the first half of this year, there have been a number of signs that the worst is over.
Britons spent about £24bn on overseas property in 2007, which declined by between 35 to 40 per cent year on year by October 2008, according to the national daily newspaper, The Independent. While hard figures are difficult to find, reports in early 2009 indicate that the market shrank further. There have been two major factors driving this: a weakened pound and difficulties in raising finance, either through equity release from UK properties or by obtaining mortgages. However, in the past couple of months there have been noticeable improvements in sterling’s strength and in the availability of mortgage financing.
The decline of the pound has had a particularly noticeable effect in eurozone purchases by British buyers. But the combined news of weakening European economies and improvements in the UK’s economy has recently boosted sterling, which reached a high of €1.18. This contrasts with December when sterling was close to parity with the euro. Many currency analysts are expecting the pound to further strengthen as the poor position of many of Europe’s financial institutions becomes more apparent. The leading credit rating agent, Standard and Poor, has given negative assessments for more than half of the eurozone banks. Many currency traders are suggesting that a rate of €1.20 will be the tipping point when many UK property investors pile back into the continental market(1).
A number of City analysts and economic experts have made positive revisions to their UK housing market predictions, saying that the decline will be less severe than originally forecast.
A poll of City economists by Reuters revealed that a majority thought house prices would drop by eight per cent this year, remain flat next year and start rising again by two per cent during 2011. From the peak of the market reached in the autumn 2007, their predictions indicate a peak to trough decline in property prices of around a quarter. This is far less severe than first forecast (The Times, June 26).
In early June, Capital Economics, a leading economic forecasting consultancy, predicted the UK housing market will decline by 10 per cent this year, compared to its previous forecast of 20 per cent. It also adjusted its forecast of 10 per cent decline in 2010 to between five and seven per cent. Rival city consultancy, IHS Global Insight, has said that its 10 per cent decline forecast was too pessimistic.
The UK’s biggest mortgage lender, Lloyds Banking Group, has recently changed its prediction for this year from a decline of 15 per cent down to 10 to 12 per cent.
Various derivative traders are now predicting a peak to trough fall in property values of 30 per cent, compared to 44 per cent given in February this year. The trough is expected to be reached in December 2010 (The Sunday Times, June 14).
Some of these forecasts have incorporated a plethora of upbeat statistics, which show property price increases or a slowdown in the rate of decline, indicating that the overall drop in prices will be less severe than first thought.
Halifax, one of the UK’s major banks, reported a 2.6 per cent property price rise in May, the biggest monthly rise for seven years. Nationwide, another important lender, reported a rise in the same month of 1.2 per cent, the third consecutive month it had reported price increases. One of the leading property market intelligence firms, Hometrack, has said that prices steadied in May after 20 months of falls.
Meanwhile the Land Registry, the government agency which handles property transfers, reported a decline of only 0.3 per cent in April, with six out of 10 UK regions reporting increases.
On the financing side, mortgage approvals rose 16 per cent in May to 31,162 loans, the highest level for 13 months, according to the British Bankers’ Association (reported in The Independent, June 24). However, gross mortgage lending was at a level last seen in February 2001. The government though its ‘quantitative easing’ programme has pumped £125 billion into the financial system, which is beginning to help improve the volume of mortgage lending(2).
Market potential
There are concerns whether the pickup in the market can be sustained. Unemployment has been rising, which will affect future property demand. Another worry is that a smaller proportion of the £125 billion will get to property purchasers than expected. This is because the banks are using the funding to bolster their balance sheets in their bid to return to profitability. An example of this is that banks are insisting on deposits of 25 per cent of the purchase price, making purchases difficult for first time buyers.
But this is of less significance to the overseas property market as purchasers are mature with considerable assets, and lending to such individuals has improved.
Overseas buyers
The UK has a high level of owners of overseas properties, and this is unlikely to change. British and Irish citizens now own up to 3.81 million homes in foreign countries(3). In fact, as this excludes time share and fractional ownership, the actual total is even higher.
Those who invest or move abroad will have been affected by the recession just like everyone else, but their plans are more likely to have been postponed rather than cancelled. People will still be contemplating retirement or emigration, and they will still have their assets or pensions, although many will wait until confidence has returned to the market before realising their dreams.
(1) Overseas Property Professional
(2) This Is Money
(3) Business intelligence organisation Datamonitor
Established two decades ago, Chelgate is a highly respected international public relations company, headed by one of the world’s most distinguished international PR professionals, Terence Fane-Saunders. Headquartered in London, with offices in Belgium and Romania, and a network of associates across the world, Chelgate is one of the leading overseas destination PR firms, and is particularly respected for the promotion of new and second home properties to the UK, Ireland and mainland European markets. The firm works for developers, property agents and other consultants promoting property destinations from Canada to Malta and Malaysia to the Philippines. These firms bring their business to Chelgate because they know our reputation for delivering results. Chelgate has also been involved in a number of sensitive projects working for public agencies promoting areas in the UK, including London, both nationally and internationally.
UK property market report (July 2009)
Market commentary
Although the UK market for overseas homes dropped sharply towards the end of 2008 and during the first half of this year, there have been a number of signs that the worst is over.
Britons spent about £24bn on overseas property in 2007, which declined by between 35 to 40 per cent year on year by October 2008, according to the national daily newspaper, The Independent. While hard figures are difficult to find, reports in early 2009 indicate that the market shrank further. There have been two major factors driving this: a weakened pound and difficulties in raising finance, either through equity release from UK properties or by obtaining mortgages. However, in the past couple of months there have been noticeable improvements in sterling’s strength and in the availability of mortgage financing.
The decline of the pound has had a particularly noticeable effect in eurozone purchases by British buyers. But the combined news of weakening European economies and improvements in the UK’s economy has recently boosted sterling, which reached a high of €1.18. This contrasts with December when sterling was close to parity with the euro. Many currency analysts are expecting the pound to further strengthen as the poor position of many of Europe’s financial institutions becomes more apparent. The leading credit rating agent, Standard and Poor, has given negative assessments for more than half of the eurozone banks. Many currency traders are suggesting that a rate of €1.20 will be the tipping point when many UK property investors pile back into the continental market(1).
A number of City analysts and economic experts have made positive revisions to their UK housing market predictions, saying that the decline will be less severe than originally forecast.
A poll of City economists by Reuters revealed that a majority thought house prices would drop by eight per cent this year, remain flat next year and start rising again by two per cent during 2011. From the peak of the market reached in the autumn 2007, their predictions indicate a peak to trough decline in property prices of around a quarter. This is far less severe than first forecast (The Times, June 26).
In early June, Capital Economics, a leading economic forecasting consultancy, predicted the UK housing market will decline by 10 per cent this year, compared to its previous forecast of 20 per cent. It also adjusted its forecast of 10 per cent decline in 2010 to between five and seven per cent. Rival city consultancy, IHS Global Insight, has said that its 10 per cent decline forecast was too pessimistic.
The UK’s biggest mortgage lender, Lloyds Banking Group, has recently changed its prediction for this year from a decline of 15 per cent down to 10 to 12 per cent.
Various derivative traders are now predicting a peak to trough fall in property values of 30 per cent, compared to 44 per cent given in February this year. The trough is expected to be reached in December 2010 (The Sunday Times, June 14).
Some of these forecasts have incorporated a plethora of upbeat statistics, which show property price increases or a slowdown in the rate of decline, indicating that the overall drop in prices will be less severe than first thought.
Halifax, one of the UK’s major banks, reported a 2.6 per cent property price rise in May, the biggest monthly rise for seven years. Nationwide, another important lender, reported a rise in the same month of 1.2 per cent, the third consecutive month it had reported price increases. One of the leading property market intelligence firms, Hometrack, has said that prices steadied in May after 20 months of falls.
Meanwhile the Land Registry, the government agency which handles property transfers, reported a decline of only 0.3 per cent in April, with six out of 10 UK regions reporting increases.
On the financing side, mortgage approvals rose 16 per cent in May to 31,162 loans, the highest level for 13 months, according to the British Bankers’ Association (reported in The Independent, June 24). However, gross mortgage lending was at a level last seen in February 2001. The government though its ‘quantitative easing’ programme has pumped £125 billion into the financial system, which is beginning to help improve the volume of mortgage lending(2).
Market potential
There are concerns whether the pickup in the market can be sustained. Unemployment has been rising, which will affect future property demand. Another worry is that a smaller proportion of the £125 billion will get to property purchasers than expected. This is because the banks are using the funding to bolster their balance sheets in their bid to return to profitability. An example of this is that banks are insisting on deposits of 25 per cent of the purchase price, making purchases difficult for first time buyers.
But this is of less significance to the overseas property market as purchasers are mature with considerable assets, and lending to such individuals has improved.
Overseas buyers
The UK has a high level of owners of overseas properties, and this is unlikely to change. British and Irish citizens now own up to 3.81 million homes in foreign countries(3). In fact, as this excludes time share and fractional ownership, the actual total is even higher.
Those who invest or move abroad will have been affected by the recession just like everyone else, but their plans are more likely to have been postponed rather than cancelled. People will still be contemplating retirement or emigration, and they will still have their assets or pensions, although many will wait until confidence has returned to the market before realising their dreams.
(1) Overseas Property Professional
(2) This Is Money
(3) Business intelligence organisation Datamonitor
