| Safe as houses? Resi rents down, house prices up
The focus is on the ups and downs of the UK residential market this week with news that the latest ONS house price index for August shows that growth is picking up steam as 2020 progresses, despite the effects of the pandemic.
The average UK average house price has increased by 2.5 per cent over the year to August 2020, up from 2.1 per cent in July 2020. And with the full effects of the Stamp Duty holiday, which came into effect in July, yet to be reflected in the figures, further increases look likely.
"It can take around 6-8 weeks at least to complete a house sale, so we will have to wait for next month's data to get a clearer picture," says Lee Pickett, a real estate partner at global legal business, DWF. "But with prices continuing their upward trend even before the stamp duty intervention, we can expect to see even greater increases next month."
On the rental front, things don't look quite so rosy though, with research from lettings specialist SpareRoom suggesting that the average London room rent dropped by 7 per cent between Q3 2019 and Q3 2020 from GBP780 to GBP725. And Edinburgh has seen even bigger falls than London with average room rents in the Scottish Capital down 10 per cent.
"With so many young renters leaving the Capital, either to find cheaper rents, to move with family, or to leave the UK altogether, it's hard to know when, or even if, London will regain the appeal it had before the pandemic," says Matt Hutchinson, a Director at SpareRoom. "What we’re seeing might just be a temporary shift in the rental market, or it may be the start of the UK’s rental map being redrawn permanently."
Interest in the UK rental sector – and build-to-rent (BTR) projects in particular – remains healthy though, with Investec’s Structured Property Finance team this week agreeing a GBP36 million, five-year senior debt facility with Comer Homes, for the development of the final phase of a two-block landmark riverside BTR residential scheme in Woolwich, London. And Apirose is another real estate investor committed to the UK residential market having recently completed the acquisition of a prime scheme adjacent to Regent's park in London.
“With its strong fundamentals and resilience during uncertain times, we remain committed to the residential sector as part of our growth strategy and continue to look for opportunities in this attractive area for investment," says Meenal Devani, Chief Investment Officer at Aprirose.
On the continent meanwhile, both the French and German real estate markets seem to have weathered the Covid-19 storm well with recent RCA figures suggesting that German and French investors are on track to allocate more capital to property than last year. And according to Savills, the German residential property market has been almost unaffected by the coronavirus pandemic. Transactions involving properties with at least 50 apartments changed hands for approximately EUR15.8 billion in the first three quarters of 2020, an increase of 29 per cent year on year as well as a 29 per cent increase on the five-year average.
“The fact that the German apartment market has come through the pandemic almost unscathed so far underlines the status of residential property as a safe haven, particularly in Germany," says Karsten Nemecek, Managing Director, Corporate Finance – Valuation, Savills Germany.
Property Funds World
|
