Weakening affordability and lack of supply sees home sales fall in the US

Weakening affordability and lack of supply sees home sales fall in the US

After starting the year at the fastest pace in almost a decade, existing home sales in the United States fell in February but remained above year ago levels both nationally and in all major regions.

Total existing home sales fell by 3.7% to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month’s decline, February’s sales are still 5.4% above a year ago, according to the data from the National Association of Realtors (NAR).

The data also shows that the median existing home price for all housing types in February was $228,400, up 7.7% year on year and the fastest since January 2016 and the 60th month in a row of year on year rises.

The decline in sales has been caused by not enough properties on the market and weakening affordability conditions across the country which is stifling buyers, according to Lawrence Yun, NAR chief economist.

He pointed out that while real estate agents are reporting stronger foot traffic from a year ago, low supply in the affordable price range continues to push up price growth and pressurise the budgets of prospective buyers.

‘Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market. Until an increase in listings actually occurs, home prices will continue to move hastily,’ Yun said.

Total housing inventory at the end of February increased 4.2% to 1.75 million but is still 6.4% lower than a year ago and has fallen year on year for 21 consecutive months. Unsold inventory is at a 3.8 month supply at the current sales pace, up from 3.5 months in January.

First time buyers accounted for 32% of sales in February, down from 33% in January but up from 30% a year ago. NAR research shows that during 2016 it averaged 35%.

But investors are making up an above average share of the market and Yun said that affordability constraints are holding back potential first time buyer who are currently renting and that means demand for rental homes will remain solid and fuel the interest of property investors. He added that the ability of investors to pay cash means that they are in competition with first time buyers.

A breakdown of the figures show that single family home sales fell 3% in February and are now 5.8% above a year ago. The median existing single family home price was $229,900, up 7.6% from February 2016.

Existing condominium and co-op sales fell by 9.2% but are still 1% higher than a year ago and the median existing condo price was $216,100, up 8.2% above a year ago.

In February existing home sales in the Northeast fell 13.8% but are still 1.5% above a year ago. The median price in the Northeast was $250,200, up 4.1% from February 2016 while in the Midwest, existing home sales fell 7% but are still 2.6% above a year ago with a median price of $171,700, up 6.1% year on year.

Existing home sales in the South increased 1.3% and are 5.9% above February 2016 with a median price of $205,300, up 9.6% year on year and in the West sales decreased 3.1% but are 9.6% above a year ago with a median price of $339,900, up 9.6% year on year.

Sydney and Melbourne lead property price growth in Australia, official figures show

Sydney and Melbourne lead property price growth in Australia, official figures show

Residential property prices in Australia increased by 4.1% in the final quarter of 2016, the strongest quarterly growth recorded since June 2015, according to latest official figures to be published.

Melbourne recorded the largest increased through the year of all capital cities with a rise of 10.8% followed closely by Sydney with a rise of 10.3%, the data from the Australian Bureau of Statistics shows.

Sydney and Melbourne also recorded the strongest quarterly growth with values up 6.1% and 6% respectively in the fourth quarter of 2016, fuelling concerns that rising prices are creating affordability issues in these two cities.

Prices increased by 8.8% year on year in Tasmania, by 5.5% in the Australian Capital Territory and by 3.8% in Queensland. But prices fell by 4.1% in Western Australia and by 7% in the Northern Territory.

Property prices fell by 1.7% in Perth, by 1.3% in Brisbane and by 2.5% in Darwin while prices rose in all other capital cities, the data also shows.

The total value of Australia’s 9.8 million residential properties increased by $274.2 billion to $6.4 trillion while the mean price of a home is now $656,800.

The large divergence in growth rates between Australia’s eight capital cities should not be a surprise, according to Harley Dale, chief economist of the Housing Industry Association (HIA).

‘Sydney and Melbourne represent 40% of Australia’s population and some concern regarding the trajectory of house price growth in these two markets is warranted. Elsewhere, people still scratch their heads when it comes to a supposed housing price boom because that simply hasn’t been their experience this cycle, even allowing for some recovery in prices in recent times,’ he said.

Dale hit out at speculation that interest rate rises and tighter lending are needed to cool the housing market. ‘There has been speculation regarding some tension between members of Australia’s Council of Regulators, plus an (appropriate) questioning of banks’ out of cycle interest rate hikes,’ he said.

‘People can make of that what they will, but let’s not lose sight of the main goal. Yes, there is some need to tighten lending conditions for some Australian housing markets in terms of geographical areas and dwelling types,’ he pointed out.

‘However, a blanket tightening of lending conditions, as now seems to be emerging again, is the wrong policy and risks damaging Australia’s financial stability. That is the very opposite to the ideal outcome authorities want to achieve,’ he added.

Germany overtakes UK as most active European commercial property market

Germany overtakes UK as most active European commercial property market

Germany overtook the UK as the most active commercial property market in Europe in 2016 with transactions totalling €59 billion, according to the latest research.

Although investment volumes declined 14% year on year, global real estate advisor Knight Frank reports that Germany was established last year as Europe’s safe haven due to its robust economy and relative political stability and the diversity of its property markets.

Approximately 55% of the total transaction volume was spread over seven key cities in 2016 of Berlin, Frankfurt, Hamburg, Munich, Cologne, Dusseldorf and Stuttgart with second tier cities such as Leipzig attracting unprecedented levels of investment.

Over 60% of investment transactions in 2016 involved German buyers, as competitive pricing started to price out overseas investors, the report points out, adding that occupier demand is characterised as strong, with Berlin and Munich recording rental growth and rents in Frankfurt remaining at a high level.

It is Berlin’s emergence as one of Europe’s pre-eminent creative hubs that has seen the city post record levels of office take up for the past three years, the report says, and as a result it is a compelling proposition for investors with transactions totalling €5.7 billion in 2016.

Germany overtakes UK as most active European commercial property market cd…

The report also points out that as mainland Europe’s leading financial centre, Frankfurt is host to more than 230 national and international banking institutions and in 2016 saw the highest level of leasing activity since the global financial crisis of 2007 with 530,000 square meters let.

Indeed, around €4.7 billion was invested into Frankfurt’s commercial property last year, and despite a restricted availability of office investment stock, the office sector attracted €3.3billion in capital.

Munich, meanwhile, is Germany’s second largest employment hub where around 30,000 jobs are created each year and this is underpinning strong demand for office space. A total of 780,000 square meters of office space was let in 2016, one of the highest totals ever recorded, and was the second most popular German destination among investors, with transactions totalling €5.5 billion.

‘Germany is one of the premier advanced economies in which to invest, and it emerged as the leading destination for real estate capital in Europe in 2016,’ said James Roberts, chief economist at Knight Frank.

‘The economic outlook remains strong, as it continues to lead the recovery in mainland Europe, although with a national election in September some investors may adopt a more cautious stance in the short term,’ he added.

According to Joachim von Radecke, head of the German Desk of European Capital Markets at Knight Frank, many property investors are attracted by the diversity in the German market. ‘With seven key cities all with distinct characteristics in terms of occupational demand this will continue to be a key differentiator for Germany versus other European markets,’ he said.

UK property industry disappointed that letting agents not included in money directive

UK property industry disappointed that letting agents not included in money directive

The UK property industry believes that a decision by the Government not to include letting agents in its proposals for legislation to meet the requirements of the fourth Money Laundering Directive is wrong.

There are several elements of the consultation on the directive that are likely to have an impact on the property sector and while estate agents will be expected to carry out customer due diligence (CDD), lettings agents will not.

It means that while buyers and sellers of properties will be checked by estate agents tenants and landlords will not.

‘We’re disappointed the Government has chosen not to include letting activity within the money laundering regulations 2017,’ said David Cox, ARLA Propertymark chief executive.

‘The risk with this is that money laundering activity will transfer from the sales sector due to the increased powers within the new regulation, into the lettings sector which remains unregulated,’ he pointed out.

‘However, within the context of the recently increased legislative burden on letting agents, coupled with the shock announcement to ban letting agent fees in the Autumn Statement, we understand why the Government has chosen not to impose these requirements at this critical juncture,’ he added.

According to Mark Hayward, NAEA Propertymark chief executive, it is good news that the consultation on money laundering has finally appeared and he said that when the legislation comes into force, it’s vital the property sector acts to implement the changes.

‘The Government has announced that purchasers are now included in the application of customer due diligence, so additional checks will need to be made by sales agents and auctioneers, which will be complicated by the fact that buyers are sometimes at arm’s length and there’s not necessarily a face to face relationship,’ he explained.

‘However, further clarity will be required as to at what point the purchaser becomes a purchaser, and this is an issue we will be seeking guidance on,’ he added.

The Royal Institute of Chartered Surveyors (RICS), said it will seek views from the industry before providing a response to the Government consultation. ‘We would welcome views on any elements of the Government’s proposals,’ said RICS associate director Jon Bowey.

There has been concerns that potentially corrupt overseas buyers have been using the London property market in particular to launder money. Recently the Homes Affairs Select Committee said in a report that current rules are inadequate.

‘Investment in London properties is a major route which tarnishes the image of the capital. Supervision of the property market is totally inadequate, and poor enforcement has laid out a welcome mat for launderers and organised criminals,’ said committee chairman Keith Vaz.

Weakening affordability and lack of supply sees home sales fall in the US

Weakening affordability and lack of supply sees home sales fall in the US

After starting the year at the fastest pace in almost a decade, existing home sales in the United States fell in February but remained above year ago levels both nationally and in all major regions.

Total existing home sales fell by 3.7% to a seasonally adjusted annual rate of 5.48 million in February from 5.69 million in January. Despite last month’s decline, February’s sales are still 5.4% above a year ago, according to the data from the National Association of Realtors (NAR).

The data also shows that the median existing home price for all housing types in February was $228,400, up 7.7% year on year and the fastest since January 2016 and the 60th month in a row of year on year rises.

The decline in sales has been caused by not enough properties on the market and weakening affordability conditions across the country which is stifling buyers, according to Lawrence Yun, NAR chief economist.

He pointed out that while real estate agents are reporting stronger foot traffic from a year ago, low supply in the affordable price range continues to push up price growth and pressurise the budgets of prospective buyers.

‘Newly listed properties are being snatched up quickly so far this year and leaving behind minimal choices for buyers trying to reach the market. Until an increase in listings actually occurs, home prices will continue to move hastily,’ Yun said.

Total housing inventory at the end of February increased 4.2% to 1.75 million but is still 6.4% lower than a year ago and has fallen year on year for 21 consecutive months. Unsold inventory is at a 3.8 month supply at the current sales pace, up from 3.5 months in January.

First time buyers accounted for 32% of sales in February, down from 33% in January but up from 30% a year ago. NAR research shows that during 2016 it averaged 35%.

But investors are making up an above average share of the market and Yun said that affordability constraints are holding back potential first time buyer who are currently renting and that means demand for rental homes will remain solid and fuel the interest of property investors. He added that the ability of investors to pay cash means that they are in competition with first time buyers.

A breakdown of the figures show that single family home sales fell 3% in February and are now 5.8% above a year ago. The median existing single family home price was $229,900, up 7.6% from February 2016.

Existing condominium and co-op sales fell by 9.2% but are still 1% higher than a year ago and the median existing condo price was $216,100, up 8.2% above a year ago.

In February existing home sales in the Northeast fell 13.8% but are still 1.5% above a year ago. The median price in the Northeast was $250,200, up 4.1% from February 2016 while in the Midwest, existing home sales fell 7% but are still 2.6% above a year ago with a median price of $171,700, up 6.1% year on year.

Existing home sales in the South increased 1.3% and are 5.9% above February 2016 with a median price of $205,300, up 9.6% year on year and in the West sales decreased 3.1% but are 9.6% above a year ago with a median price of $339,900, up 9.6% year on year.

Property market in Dubai stabilises but still declining in Abu Dhabi

Property market in Dubai stabilises but still declining in Abu Dhabi

The residential real estate market in Dubai is showing signs of having bottomed out with the latest sales and price figures moving into positive territory in February.

The Dubai residential property sales price index from ReidIn increased by 0.3 points, an increase of 0.10% month on month and prices are now 0.97% higher year on year.

Apartment prices rose by 0.12% month on month and 1.06% year on year while villa prices were up 0.06% month on month and 0.59% year on year.

But rents are still falling. The rental price index decreased by 0.8 points with rents down 0.9% month on month and down 3.69% compared to February 2016.

Apartment rents fell by 1.04% month on month and 2.89% year on year while villa rents were down 0.1% month on month and 7.86% year on year.

In neighbouring Abu Dhabi the property market is still declining. The ReidIn price index fell by 0.9 points with prices down 1.18% month on month and 6.23% year on year.

A breakdown of the figures show that in Abu Dhabi prices for apartments fell by 1.12% month on month and 5.86% year on year while villa prices decreased by 1.31% on a monthly basis and 7.39% annually.

In the lettings sector the rental index decreased by 0.7 points with rents down 1.16% in February compared to January 2017 and down 8.59% year on year.

Apartment rents fell by 1.3% month on month and 9.81% year on year while villa rents were down 0.82% month on month and 4.81% year on year.

Meanwhile, a new analysis shows that Dubai real estate assets have given a 120% return to investors in the 10 years since the global financial crisis. As a result of the crisis many projects in Dubai stalled or were cancelled.

But now the property market in the emirate is recovering having been boosted by a number of Government investments and the awarding of Expo 2020 to Dubai, says the ReidIn Global Capital Partners report.

The 120% return compares to 75% in London and 63% in New York and the report explains that the bulk of the returns in Dubai have been through rental increases.

‘Dubai has become a magnet for international investors for real estate, and monetary inflows have continued to increase steadily over the last decade,’ it concludes.

Sydney and Melbourne lead property price growth in Australia, official figures show

Sydney and Melbourne lead property price growth in Australia, official figures show

Residential property prices in Australia increased by 4.1% in the final quarter of 2016, the strongest quarterly growth recorded since June 2015, according to latest official figures to be published.

Melbourne recorded the largest increased through the year of all capital cities with a rise of 10.8% followed closely by Sydney with a rise of 10.3%, the data from the Australian Bureau of Statistics shows.

Sydney and Melbourne also recorded the strongest quarterly growth with values up 6.1% and 6% respectively in the fourth quarter of 2016, fuelling concerns that rising prices are creating affordability issues in these two cities.

Prices increased by 8.8% year on year in Tasmania, by 5.5% in the Australian Capital Territory and by 3.8% in Queensland. But prices fell by 4.1% in Western Australia and by 7% in the Northern Territory.

Property prices fell by 1.7% in Perth, by 1.3% in Brisbane and by 2.5% in Darwin while prices rose in all other capital cities, the data also shows.

The total value of Australia’s 9.8 million residential properties increased by $274.2 billion to $6.4 trillion while the mean price of a home is now $656,800.

The large divergence in growth rates between Australia’s eight capital cities should not be a surprise, according to Harley Dale, chief economist of the Housing Industry Association (HIA).

‘Sydney and Melbourne represent 40% of Australia’s population and some concern regarding the trajectory of house price growth in these two markets is warranted. Elsewhere, people still scratch their heads when it comes to a supposed housing price boom because that simply hasn’t been their experience this cycle, even allowing for some recovery in prices in recent times,’ he said.

Dale hit out at speculation that interest rate rises and tighter lending are needed to cool the housing market. ‘There has been speculation regarding some tension between members of Australia’s Council of Regulators, plus an (appropriate) questioning of banks’ out of cycle interest rate hikes,’ he said.

‘People can make of that what they will, but let’s not lose sight of the main goal. Yes, there is some need to tighten lending conditions for some Australian housing markets in terms of geographical areas and dwelling types,’ he pointed out.

‘However, a blanket tightening of lending conditions, as now seems to be emerging again, is the wrong policy and risks damaging Australia’s financial stability. That is the very opposite to the ideal outcome authorities want to achieve,’ he added.

Global office property markets resilient despite economic and political uncertainty

Global office property markets resilient despite economic and political uncertainty

The fundamentals of the global office market are resilient with leasing volumes at their highest level for 2016 in the final quarter of the year with growth of 6%, the latest analysis shows.

For the full year, leasing volumes were down modestly by only 3% on the robust levels of 2015, according to the report from international real estate firm JLL, which adds that this is a positive outcome in the face of political and economic uncertainty.

Full year 2016 take-up in the region reached 12.1 million square metres, a marginal 2% decrease on 2015, but in line with expectations. ‘We forecast European take-up to be around 11.7 million square metres in 2017, broadly flat on 2016 levels as expansionary drive on the continent keeps demand levels above the 10 year average,’ the report adds.

Asia Pacific finished the year on a strong note with gross leasing activity up by 23% year on year in the fourth quarter of 2016, leaving full year volumes down just 2% on 2015 levels. Financials and tech firms remained the most active sectors although demand trends were mixed across many Asian markets.

With lingering uncertainty surrounding the economic and political backdrop, JLL expects that 2017 gross leasing volumes in Asia Pacific to be relatively in line with 2016 with a modest downside of up to 5%. Although aggregate conditions are likely to be generally stable, the performance will continue to be varied as local market drivers diverge, the report says.

Overall at the end of 2016 the global office vacancy rate fell below 12% to 11.9% for the first time in this cycle, reaching its lowest level since the third quarter of 2008. Vacancies continued their downward trend in the Americas to 14.5%, but we also saw surprise falls in Europe, down 20 to 8.1%, and in Asia Pacific down to 10.9%.

Nonetheless, the report says that global office vacancies are set to trend slowly upwards during 2017 to reach 12.3% by the end of the year as new deliveries accelerate. Office completions are expected to be 37% higher in 2017 than in 2016, with this year marking the peak in the development cycle. About one third of completions slated for 2017 have already been pre-leased and new development completions are projected to tail off during 2018 and 2019.

Annual rental growth for prime offices across 26 major markets slowed to 2.5% in the final quarter, with a further softening anticipated in 2017 to about 2% on average. Leasing conditions are expected to become more balanced in 2017 as many markets seek to absorb a greater volume of new deliveries and occupiers keep an eye on costs.

Even so, the bulk of major office markets are projected to remain in positive territory in 2017, with only Shanghai, Beijing, London, Mexico City, Sao Paulo and Singapore likely to see a correction in prime rents over the next 12 months. Sydney is predicted to be the top performer, with growth of 10% to 15% this year on top of the 22.5% seen in 2016.

Asia Pacific and Europe had their strongest quarter of 2016, and leasing volumes in both regions finished the year just 2% below the levels of 2015. Meanwhile, the United States saw a disappointing final quarter due to the lack of ‘mega leasing’ deals and its full year volumes were down by 5% year on year.

Looking ahead JLL forecasts global leasing volumes in 2017 will be broadly stable on 2016 levels and the US offers the greatest upside potential of up to 5%. But due to lingering economic and political uncertainty, it also predicts gross leasing volumes in Europe and Asia Pacific to be generally in line with 2016, with a modest downside risk of up to 5% in Asia Pacific

A combination of a 7% fall in leasing volumes in the United States and a lower number of mega leasing deals in the fourth quarter of 2016 resulted in the lowest level of occupancy growth in the US office market in two years.

The report explains that near full employment and a shortage of skilled talent has restricted expansion activity in several major technology hubs, while political uncertainty associated with the November Presidential election caused some tenants to adopt a wait and see mentality.

Looking to the year ahead in the US it says that a shift in public policy that favours deregulation and lower taxation may serve as a catalyst for growth in select industries that have faced increased regulatory pressures over the past eight years and for the US financial markets in general.

It concludes that in the US although a rising interest rate environment will create both challenges and opportunities, overall macro-economic conditions support solid growth in 2017.

Strong occupier demand continued across most of Europe during the fourth quarter, with take-up reaching 3.4 million square metres and while this was down 9% on the fourth quarter of 2015, JLL says that annual comparisons with that particularly robust quarter which was the strongest the end of 2006 were always going to be unflattering.

Housing market confidence rises in the US, but is down on a year ago

Housing market confidence rises in the US, but is down on a year ago

Most households in the United States believe the spring season is a good time to buy a home but those in the rental sector are less confident, new research shows.

Some 80% of home owners are positive about the market, up from 78% in December 2016 but down from 82% a year ago, according to the research from the National Association of Realtors.

But just 56% of those who rent think it is a good time to buy, down slightly from 57% in in December 2016 and down from 62% a year ago.

Overall, younger households, renters and those living in the costlier West region where prices continue to rise, are the least optimistic, the study also found.

NAR chief economist Lawrence Yun pointed out that a lack of homes for sale, prices and rising mortgage rates are putting people off. ‘These factors are giving many renter households a pause about it being a good time to buy, even as their job prospects improve and wages grow,’ he said.

‘Unless there’s a significant boost in supply levels this spring, these constraints will unfortunately slow or delay some prospective buyers’ pursuit of purchasing a home,’ he added.

One promising trend that could alleviate supply shortages is a rise in the share of respondents this quarter who believe now is a good time to sell a home. Sone 69% of home owners think now is a good time to sell, up from 62% in the December quarter of last year and up from 56% in March 2016.

Continuing the trend over the past year, those in the West continue to be the most likely to think now is a good time to sell with 77% saying so and they are also the least likely to think it’s a good time to buy at 61%.

‘Demand far outpaces supply in many parts of the country right now, which means home owners will likely sell their home much quicker than the time it takes to buy another,’ said NAR president William Brown.

Germany overtakes UK as most active European commercial property market

Germany overtakes UK as most active European commercial property market

Germany overtook the UK as the most active commercial property market in Europe in 2016 with transactions totalling €59 billion, according to the latest research.

Although investment volumes declined 14% year on year, global real estate advisor Knight Frank reports that Germany was established last year as Europe’s safe haven due to its robust economy and relative political stability and the diversity of its property markets.

Approximately 55% of the total transaction volume was spread over seven key cities in 2016 of Berlin, Frankfurt, Hamburg, Munich, Cologne, Dusseldorf and Stuttgart with second tier cities such as Leipzig attracting unprecedented levels of investment.

Over 60% of investment transactions in 2016 involved German buyers, as competitive pricing started to price out overseas investors, the report points out, adding that occupier demand is characterised as strong, with Berlin and Munich recording rental growth and rents in Frankfurt remaining at a high level.

It is Berlin’s emergence as one of Europe’s pre-eminent creative hubs that has seen the city post record levels of office take up for the past three years, the report says, and as a result it is a compelling proposition for investors with transactions totalling €5.7 billion in 2016.

The report also points out that as mainland Europe’s leading financial centre, Frankfurt is host to more than 230 national and international banking institutions and in 2016 saw the highest level of leasing activity since the global financial crisis of 2007 with 530,000 square meters let.

Indeed, around €4.7 billion was invested into Frankfurt’s commercial property last year, and despite a restricted availability of office investment stock, the office sector attracted €3.3billion in capital.

Munich, meanwhile, is Germany’s second largest employment hub where around 30,000 jobs are created each year and this is underpinning strong demand for office space. A total of 780,000 square meters of office space was let in 2016, one of the highest totals ever recorded, and was the second most popular German destination among investors, with transactions totalling €5.5 billion.

‘Germany is one of the premier advanced economies in which to invest, and it emerged as the leading destination for real estate capital in Europe in 2016,’ said James Roberts, chief economist at Knight Frank.

‘The economic outlook remains strong, as it continues to lead the recovery in mainland Europe, although with a national election in September some investors may adopt a more cautious stance in the short term,’ he added.

According to Joachim von Radecke, head of the German Desk of European Capital Markets at Knight Frank, many property investors are attracted by the diversity in the German market. ‘With seven key cities all with distinct characteristics in terms of occupational demand this will continue to be a key differentiator for Germany versus other European markets,’ he said.