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.

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.

Total mortgage lending in UK still affected by weakness in buy to let

Total mortgage lending in UK still affected by weakness in buy to let

Gross mortgage lending in the UK reached £18.2 billion in February, down 8% on January’s lending total of £19.8 billion but not far from the £18.1 billion lent in February last year.

The figures from the latest market report from the Council of Mortgage Lenders, which represents the vast majority of home lenders in the country, suggest that current weaknesses are likely to continue.

‘Mortgage lending is holding up well, but under the surface buyers face mixed fortunes. First time buyers and customers who are remortgaging are driving total lending, while home movers and buy to let remain weak,’ said CML senior economist Mohammad Jamei.

‘The weakness in home movers means few properties are coming onto the market for sale, which is aggravating a supply demand imbalance that has characterised the market since late 2013. This looks set to continue at least over the next few months, posing an obstacle for would-be borrowers,’ he added.

Henry Woodcock, principal mortgage consultant at IRESS, expects the market to pick up a bit in March, traditionally the start of the busy spring buying season. ‘There was no stimulus to housing provided in the Spring Budget, and forecasts by estate agents indicate that the number of home transactions completed will fall % this year,’ he said.

‘However, I still expect March gross lending to be slightly higher than February, although it will not reach the heady height of 2016 which was driven to a great extent by impending buy to let changes,’ he explained.

‘Of course, one thing could change this. The recent jump in inflation to 2.3% is the first above target rise since November 2013. No doubt this will put some pressure on the Bank of England’s Monetary Policy Committee (MPC) to start considering interest rate rises,’ he pointed out.

‘If that were to happen it would obviously mean higher monthly payments for people on tracker and variable mortgages, and lenders would react quickly to pull some of the very cheap mortgage deals. It wouldn’t surprise me if we see an unusually higher spike in mortgage activity over the coming months as people look to secure the best deals while they’re still available,’ he added.

John Eastgate, sales and marketing director of OneSavings Bank, pointed out that a nine year high for gross mortgage lending in January proved that mortgage demand is effervescent. ‘But given the record highs, some moderation was to be expected and is arguably welcomed. The Brexit effect and the base rate cut have driven mortgage rates to all-time lows, supporting mortgage activity, most prominently in remortgaging,’ he said.

‘While buy to let purchases have seen a dip since the changes to stamp duty costs last year, the sector has also seen a surge in demand from landlords refinancing to take advantage of low rates to reduce their costs. We should expect to see remortgage activity continue to drive lending levels in 2017 as a lack of supply and stretched affordability, will continue to subdue the purchase market,’ he added.

Total mortgage lending in UK still affected by weakness in buy to let

Total mortgage lending in UK still affected by weakness in buy to let

Gross mortgage lending in the UK reached £18.2 billion in February, down 8% on January’s lending total of £19.8 billion but not far from the £18.1 billion lent in February last year.

The figures from the latest market report from the Council of Mortgage Lenders, which represents the vast majority of home lenders in the country, suggest that current weaknesses are likely to continue.

‘Mortgage lending is holding up well, but under the surface buyers face mixed fortunes. First time buyers and customers who are remortgaging are driving total lending, while home movers and buy to let remain weak,’ said CML senior economist Mohammad Jamei.

‘The weakness in home movers means few properties are coming onto the market for sale, which is aggravating a supply demand imbalance that has characterised the market since late 2013. This looks set to continue at least over the next few months, posing an obstacle for would-be borrowers,’ he added.

Henry Woodcock, principal mortgage consultant at IRESS, expects the market to pick up a bit in March, traditionally the start of the busy spring buying season. ‘There was no stimulus to housing provided in the Spring Budget, and forecasts by estate agents indicate that the number of home transactions completed will fall % this year,’ he said.

‘However, I still expect March gross lending to be slightly higher than February, although it will not reach the heady height of 2016 which was driven to a great extent by impending buy to let changes,’ he explained.

‘Of course, one thing could change this. The recent jump in inflation to 2.3% is the first above target rise since November 2013. No doubt this will put some pressure on the Bank of England’s Monetary Policy Committee (MPC) to start considering interest rate rises,’ he pointed out.

‘If that were to happen it would obviously mean higher monthly payments for people on tracker and variable mortgages, and lenders would react quickly to pull some of the very cheap mortgage deals. It wouldn’t surprise me if we see an unusually higher spike in mortgage activity over the coming months as people look to secure the best deals while they’re still available,’ he added.

John Eastgate, sales and marketing director of OneSavings Bank, pointed out that a nine year high for gross mortgage lending in January proved that mortgage demand is effervescent. ‘But given the record highs, some moderation was to be expected and is arguably welcomed. The Brexit effect and the base rate cut have driven mortgage rates to all-time lows, supporting mortgage activity, most prominently in remortgaging,’ he said.

‘While buy to let purchases have seen a dip since the changes to stamp duty costs last year, the sector has also seen a surge in demand from landlords refinancing to take advantage of low rates to reduce their costs. We should expect to see remortgage activity continue to drive lending levels in 2017 as a lack of supply and stretched affordability, will continue to subdue the purchase market,’ he added.
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