• London property shakeout
• London Retail
• London Homes
• High society in London
• From the Gulf, Money for London Towers
• UK Real Estate losses may be biggest in 25 years
• Property crunch
• UK Housing Market Survey
• Commercial Property Slowdown Warning

Demand for London offices tumbles

The number of cranes adorning the London skyline has fallen by a fifth in just six months as the financial downturn chokes off corporate demand for newly built office space.

Developments under way have fallen by more than half in a year, from 46 in the third quarter last year to just 17 in the past three months. But a report on Thursday warns that London is still facing a huge oversupply of empty office space in the next few years

Despite the slowdown in new starts this year, more than 12m sq ft of office space is still under construction, according to the Crane Survey from property consultancy Drivers Jonas out next week, equivalent to about 25 new blocks the size of Swiss Re’s “Gherkin” tower in the City of London.

There is already about 15m sq ft of office space lying empty in central London, and vacancy rates in parts of the capital such as the City are set to rocket as banks and other financial institutions look to reduce staff and freeze relocation plans.

In the Square Mile alone there is 5.6m sq ft of space under construction without a waiting tenant, and the majority of this will be completed in 2009. The larger speculative schemes include Minerva’s Walbrook development, the Heron tower in Bishopsgate and British Land’s Ropemaker Place.

The impact of the global credit crisis on the financial services sector means rents in the City of London are already tumbling – they have fallen to about £57 per sq ft from a peak of £65 per sq ft last summer.

Given the additional problem of an increase in so-called grey space – where banks and other occupiers attempt quietly to sublet their own properties as staff numbers fall – some agents predict rents could slip nearer £40 per sq ft before the end of the economic downturn.

Drivers Jonas said it did not expect any significant new starts “for some time” in the City. The report also warns that other markets across London will not escape the downturn as economic conditions and the fallout from the financial crisis weighs on take-up of office space during the next 12 to 18 months.

The West End is the only area to record an increase in new starts, up from six to nine in the past six months. While at less risk of overdevelopment, the report warns Mayfair’s reliance on hedge funds means rents will fall from record levels as this source of demand dries up. Other markets such as Canary Wharf, the Southbank and King’s Cross have seen no new commercial building in the past six months. Canary Wharf, however, could still be “caught out by its Achilles’ heel – a heavy reliance on the American financial sector”, according to the report.

“The demise of two of its key tenants, Bear Stearns and Lehmans, could put a huge amount of top quality space on to the market,” it warns.

Anthony Duggan, partner at Drivers Jonas, said: “The short-term outlook is one of oversupply with a consider-able volume of speculative space being delivered into the market over the next 15 to 18 months at a time of weak demand. However, the report clearly shows that new development starts in London have come to a grinding halt.”

The report says is developers are walking away from new projects, indicating they have a more realistic grasp of the level of demand in a downturn.  - 2008 November 5   FINANCIAL TIMES

It is rarely a bad time to be rich, but now is better than most, especially in London. Over the past few years the city has become a magnet for the global plutocracy, attracted by lavish nightlife, luxuries of all sorts, easy access to the rest of the world and, most of all, a comparatively benevolent taxman. Russian oligarchs mix with American tycoons and Middle Eastern oil magnates in what Forbes magazine, bible of the global super-rich, described last year as “a magnet for the world's billionaires”.

But a study published on November 5th suggests that not all the news is good. According to Stonehage, a firm of financial advisers to London's multi-millionaires, it is costing the capital's many plutocrats much more to maintain their standard of living than it used to. They reckon that prices of luxury goods and services increased by 6% in the 12 months to July, more than twice the 2.3% rise registered on the official consumer-price index .

Existing government inflation measures do not quite capture the upper-crust experience, Stonehage says. The CPI, for example, ignores many housing costs that rich and poor alike must pay, and the more comprehensive retail-price index excludes the richest 4% of consumers. Stonehage's new Affluent London Living Index is designed to fill the gap.

The details are enough to make an investment banker splutter into his increasingly expensive caviar (the price of which rose 28% over the year). Rents in central London have increased by 25% since 2002. A top-line Range Rover today costs 20% more than last year's model. Fees for day pupils at Westminster (a fancy independent school) are up by 7%, and the price of a case of Lafite Rothschild by an eye-watering 117%. Leisure has grown pricier as well: two days of grouse shooting costs 8% more this season than last and an executive box at Chelsea Football Club, London's most fashionable, has risen by 25%. Robby Hilkowitz, a director of Stonehage, blames a rapid increase in the ranks of the mega-rich for pushing up prices.

Exceptions there are: cars may be getting pricier but chauffeurs are no dearer than they were. Nor are fancy haircuts or membership of gentlemen's clubs. Entry-level private jets are actually 7% cheaper, although high oil prices could make the fuel bills painful. Breast implants for the high-earning woman are down 10%.

Yet rising consumption costs tell only half the tale. Most of the ultra-rich have the bulk of their wealth invested, so they have benefited handsomely from the sustained boom in asset prices. The same central London house that costs 25% more to rent is worth 150% more on the market. And sympathy for the plutocrats' plight may be hard to find among the great hordes of the salaried unwashed (many of whom also live in London), whose real disposable incomes are being squeezed. - 2007 November 8   ECONOMIST

European property investment seen rising 20-25% in H2
(LONDON) Investment in European commercial real estate is expected to jump 20 to 25 per cent in second half of 2005, after rising 4 per cent to 47.9 billion euros (S$97.7 billion) in the first half of 2005 over the same period of 2004, a survey showed.

'European direct real estate continues to perform well relative to other mainstream investment assets; strong risk-adjusted performance and positive yield gaps have encouraged investors throughout Europe,' , chief executive of European capital markets at property consultants Jones Lang LaSalle, said on Tuesday.

'We expect investment volumes in the second half of 2005 to reflect the same 20 per cent to 25 per cent uplift on the first half of the year that was recorded in 2004. This will drive total volumes for 2005 to well over 100 billion euros.'

European cross-border real estate investment totalled 24 billion euros in the first half of 2005, or about 50 per cent of total activity, and was 27 per cent higher than in the same period of last year.

The greatest gains in cross-border investment market share have been seen in Sweden and Central and Eastern Europe since 2000. 'In the past 18 months we have begun to see an increase in the volume of sales by cross-border investors seeking to take advantage of recent yield compression, the opportunity to crystallise profits,'  head of European research at Jones Lang LaSalle said.

Property yields (rent as a proportion of capital value) move in the opposite direction to prices, and have been falling across Europe as a wall of investment money seeks out strong real estate returns. - Reuters    11 Apr 2005

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UK house prices, which have tripled in the past decade, are already showing signs of falling. Values dropped for a second month in October, the first back-to-back decline since May 2005, mortgage lender HBOS Plc said last week.

Higher prices have made it harder for investors to profit from letting out their properties.

Rental yields on houses and apartments are now about 5 per cent, says Citigroup, which compares with the 6.37 per cent average rate offered by lenders this month on a two-year mortgage for 95 per cent of the property price. -   2007 November 13    Bloomberg

RESIDENTIAL

Centrally located properties in London continue to be in high demand though  with Asian investors concentrating acquistion of new properties during the past seven years.  Britons, on the other hand pre prefer period properties, particularly Victorian and Georgian. 

House prices are set to rise by more than 20% a year, City analysts suggested at the weekend. A leading investment bank believes a leap in London house prices this summer will trigger similar increases across the country.

A surge in demand for London properties and a lack of homes for sale will push prices in the capital sharply higher, according to Danny Gabay, UK economist for JP Morgan. This will fuel house price inflation nationally, he said.

Until recently the London property market has acted as a brake on the rapid rise in house prices elsewhere. Over the past year, the cost of homes in London has barely increased. Demand in the capital was hit by the September 11 terrorist attacks and the knock-on slide in the stock market.

But the latest survey from the Royal Institute of Chartered Surveyors reveals a sudden jump in inquiries from househunters. Its measure of estate agents reporting a rise in buyers rose from just 3% in April last year to 40% this April.

Gabay believes a steep increase in demand for London homes will send property values soaring in the capital. 'There is too much money chasing to few homes,' he said. 'No supply and a surge in demand is a lethal cocktail for inflation.'

The warning comes as house prices rose by 4.2% in May, the biggest monthly rise since records began in 1983. The previous high was 4.1% in July 1988, just weeks before the market went bust.

According to figures from the Halifax this month, the average cost of a home rose from £102,808 to £107,152 in just four weeks. The leap takes annual house price inflation to 18.5%.

Some observers fear the property market could be heading for another spectacular collapse. The latest figures are good news for homeowners but will add to the gloom of first-time buyers. They also mean it will be even harder for key workers such as nurses and firefighters to afford homes in London and the South East.

Meanwhile, as the property market soars an investigation has been ordered into dubious practices among estate agents. The inquiry, into profiteering and corruption, will be conducted by the Office of Fair Trading. Prompted by a record number of complaints, the investigation is likely to examine gazumping, a legal but widely despised ruse in which a house seller in a rising market increases the asking price after acquiring a buyer. Estate agents usually act as middle men in gazumping and profit from the higher prices. - by James Orr        Daily Mail       10 June 2002

Singaporean viewpoint on London Real Estate

Singaporeans may find it more opportune to cash in on existing London properties than to buy one at this time, considering that the pound sterling has strengthened against the Sing dollar since early last year and capital values have rocketed in the past decade before last year's relatively slight fall.   The racing London property market is  definitely easing, according to the latest research by agents FPDSavills in the United Kingdom.

At 8.5 per cent, growth was rapid in the first quarter as buyers raced to beat the March budget announcement of an increase in stamp duty, and the rate eased back to 2 per cent for the second quarter, said Yolande Barnes, UK director of research for FPDSavills.

For the whole of this year, the January forecast of 13.5 per cent for prime residential still held, giving rises of just one per cent for each of the remaining quarters. And the future looks steady and stable.

"It would take an external economic shock to shake demand sufficiently to precipitate the forced sales and widespread reductions in values across the market," Ms Barnes said. While this could not be ruled out, economic indicators looked good and inflation was low. Most at risk of a sharp correction are properties in non-prime locations or on the fringes of "emerging" areas.

"We are seeing valuations falling, for example, where people cannot afford Islington and buy on the edge of Hackney instead, or they really want Hackney but settle for neighbouring Hoxton," Ms Barnes said.

"These fringe areas have been pushed up too far, too quickly."

As usual, prime locations hold up best in a slack market but London is huge and every area is driven by local factors.

For example, prices in Mayfair, always popular with international buyers, range from £600 (about HK$6,969) per square foot for a quality refurbishment, and £700 for a newly built apartment, increasing to £1,000 per square ft around Park Lane.

Not far away in newly trendy Marleybone High Street, a different dynamic is evident. Since the Jubilee Line extension made it an easy commute to Canary Wharf, bankers and financiers have moved in. You can buy at £450 to £550 per square ft within minutes of Baker Street tube station and, with the likelihood of big bonuses later this year for property and financial sectors in the square mile, this area could shoot up.

Over time London property has proved a good bet. Anyone who bought there eight years ago - and many Asian buyers did - will be happy. They are sitting on gains of 152 per cent. The best of those years was last year, where falling interest rates and improved market sentiment drove prime residential prices up 24 per cent, according to FPDSavills.

At the top end, Ms Barnes said, there had been a subtle shift in the amount of available supply. Since the frenetic activity had eased, "discretionary selling" - where owner-occupiers who do not have to sell test the water - was happening.

If they did not make a killing, they would simply take their place off the market. But if they did sell, they in turn would become buyers.

These had replaced the buy-to-let brigade of the last few years. Demand had fallen in the investment market.

"Reduced capital growth prospects and falling yields are discouraging new private investors," Ms Barnes said. "The effects of this are likely to be felt most strongly in the new development market where marketing strategies are focused on attracting investment buyers in the early stages of the sales process," she added. So look hard beyond the hype and haggle at those Hong Kong exhibitions of off-the-plan London developments.

"It has shifted from a buyer's to a seller's market," she added.

Hong Kong-based UK property sourcer and manager for SAR clients Chris Moscrop has just returned from London. He found sensibly priced property in prime locations was still selling well, but said anything second-rate or over-priced was sticking.

"But I do not see this pause as a problem; the market had to slow down some time before it went over the cliff," he said.

He expected any drop in interest rates would kick-start the market once more, but advised anyone who had not yet bought in London, and who felt they had missed the boat, to delay their purchase a bit. Be cool, be prepared to make offers and walk away if necessary, he advised.

The lull in sales was good news for existing Hong Kong investors in top-end London property, because rentals had improved. Returns had dwindled on houses to an average net yield of 3.8 per cent for the second quarter of this year - 6.8 per cent gross. Flats fared slightly better, returning 4.3 per cent net, equal to 7.1 per cent gross.

Having been static since 1998, rental yields have made a 6 per cent leap during the first half of this year alone.

FPDSavill's 11 per cent growth prediction for this year looks a little bullish, considering many London agents are actually advising their landlords to hold rents steady to keep good tenants, or attract new ones.

Nevertheless, FPDSavills said rents had bottomed out and would reach 4 per cent net in the fourth quarter.

None of this would deter Hong Kong investors, insisted Linda Robinson, executive director of international property for Colliers Jardine. They look at the combination of yields and capital growth, and know that if the sales market slackens, the rental market improves.

Asian buyers in search of a prestige property should look at SW1 addresses - Knightsbridge, Chelsea, and along the Embankment, Ms Robinson said. Predictable advice, since Colliers Jardine will unleash units in Nine Albert Embankment Road on to the SAR market, through an off-the-plan exhibition next month. Prices will be £195,000 to £1.5 million, and units range from 500 sq ft to 2,500 sq ft, in what used to be the old British Steel building.

Property rush gathers pace

The London housing market is roaring toward one of its busiest weekends ever as a number of crucial market drivers coincide, fuelling the raging debate about whether the market is about to boil over.

The peak spring buying season, a flood of bonus money from a revived City, a new wave of wealthy foreign buyers, and a rush to lock in before further rises in interest rates have propelled demand toward record levels.

Despite recent analysts' forecasts of a potential 40% crash in prices, some estate agents say buyer numbers have risen fourfold from this time last year in a market with fewer houses for sale, and there are signs that prices are accelerating strongly.

Charles Peerless, Winkworth head of West End, Chelsea and Knightsbridge, said: 'The big difference is properties from £450,000 to £800,000, which are selling dramatically and weren't moving a year ago. We have examples of sealed bids and frustrated purchasers.'

House prices in the capital are thought to be about 9% higher than 12 months ago, more than making up for a setback during the first half of last year, and prompting concerns among some City forecasters that the market is about to overheat.

Winkworth says that house prices have risen 3.78% since the start of the year, the largest quarterly increase since January 2002, and there is little evidence that the Bank of England's recent increase in its base lending rate to 4% has deterred buyers. In fact, some are being encouraged into the market now, fearing that further rises in rates and pricier mortgages lie ahead.

James Bailey of Douglas & Gordon said: 'I have never known an Easter period like it. I even received three calls on my mobile on the Easter Sunday from sellers confirming that they wished to go ahead.'

Lane Fox director Lulu Egerton said: 'This year City bonuses are back and potential buyers have been sussing out the market since January on the back of their bonus prediction.'

Foreign buyers, led by an influx of Russian money, are also back in force, resurrecting last year's 'dead' market for multi-million pound homes, according to FPD Savills head of residential Rupert Sebag-Montefiore.

Super rich are the drivers

THIS month's record London house deal in which Indian billionaire and New Labour donor Lakshmi Mittal shelled out £70m for Formula One promoter Bernie Ecclestone's Kensington Palace Gardens mansion has had a galvanising effect at the highest levels of the capital's property scene.

With a £27m deal in Chelsea breaking the UK record for a flat this month, there has been an increase in the numbers of deep-pocketed buyers in the market. They include Russian, Irish and Asian interests and a new wave of City super-rich.

Agents report a pick-up in the number of hedge fund managers buying in the £7m-to-£15m range in Mayfair and Holland Park.  - By Mira Bar-Hillel,   Evening Standard     16 Apr 2004

Top ten UK hotspots

London prices edge up again

Fresh evidence that Britain's housing market is past its peak emerged today, although property prices in London are nudging up again following recent falls.

The latest report from Rightmove, Britain's biggest property website, shows the average asking price of a home rose by 2% in February - traditionally a busy month for house buying. But the annual rate of increase slipped from 26.5% in January to 23.5% because of a much bigger increase (4.5%) in February last year.

In London, asking prices rose 1.2% on average in February. Over the past four months, pricier central boroughs have enjoyed a strong recovery after suffering significant price falls in the autumn. Kensington and Chelsea prices have surged by 10.3%, while in the City of Westminster they are up 4%.

The report also suggests this month's interest rate cut has boosted sales activity. A record number visited Rightmove's site on the Monday after the reduction. Shipside said: 'Though the cut has not been fully matched by most of the main mortgage lenders, it may have given buyers more confidence that interest rates and mortgage repayments will remain low.'   -  By   Jane Padgham, Evening Standard   26 Feb 2004