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Total returns for All Property were 1.6% in September, driven by capital value growth of 1.2% over the month.
Significant improvements were seen in the rate of rental value growth across all main sectors in September. All Property recorded rental value growth of 0.3% over the month, the strongest rate since December 2008.
While the other property sectors saw rental values start to pick up some time ago, the retail sector has lagged behind. As a whole the retail sector recorded rental value growth of 0.3% in the month.
Strong capital value growth in the UK means that total returns at the ‘All Property’ level in the first three quarters of 2014 have already exceeded those for 2013 as a whole. This is also true of all the segments monitored in CBRE’s monthly index, with the exception of West End offices.
From 1 April 2015 a new property transaction tax will launch in Scotland, replacing the existing UK wide Stamp Duty Land Tax (SDLT). Land and Buildings Transaction Tax (LBTT) becomes the first tax to be levied and collected in Scotland since the Act of Union in 1707.
As part of the draft Scottish Budget for 2015-16, the detailed bands and rates that will apply upon launch have now been announced. For the first time we can assess the impact of the tax’s introduction.
This ViewPoint outlines what those bands and rates are, how LBTT will be calculated for both residential and non-residential properties, and how the tax due will differ from SDLT.
The report also outlines the impact LBTT may have on commercial property values in Scotland.
All in all, it has been a very positive Summer for the Belfast property sector, helped in no small part by the lack of disturbances during the traditional marching season and an encouraging volume of tourist-related activity across the region.
The outcome of the forthcoming Scottish Independence referendum on September 18th will be closely watched in Northern Ireland on the basis that the debate on Northern Ireland being given autonomy to lower its corporate tax rate to compete with the 12.5% prevailing in the Republic may resume once a decision has been made regarding Scottish Independence.
Neil Blake and Graham Barnes, experts from leading real estate provider CBRE, provide monthly analysis on the latest macroeconomic and capital markets factors that shape and influence commercial real estate markets.
As usual things have quietened down over the summer. After the surge of positive property market and economic news in the earlier part of the year, attention has turned to international events, annual leave and the ritual of rainy bank holidays. If anything, there is a bit of a feeling that the UK’s economic recovery may be softening driven, not least, by a string of disappointing economic news from the larger Eurozone countries and the generally sideways movement of equity markets since the spring. A glance at recent economic statistics, however, does not really support the softening recovery hypothesis.
True, manufacturing has come off the boil. The PMI survey results have weakened and manufacturing output is down. This reminds us that manufacturing remains the sector most exposed to international difficulties. In contrast, for services there has been some improvement in the PMI over the last two months but the situation since last summer can best be described as “bumping along the top” (in sharp contrast to the “bumping along the bottom” that we became used to during the recession). Eurostat’s Economic Sentiment Indicator for the UK also jumped up last autumn and, despite small month-to-month movements, has remained extraordinarily strong ever since. These levels of survey responses are easily consistent with Q3 growth at or above the 0.8% recorded in the first and second quarters.
It has not been a quiet summer. One could have assumed that the sale of Lend Lease’s interest in Bluewater to Land Securities was the last big deal before the autumn, but that would have been a mistake.
Against a background of, at best, variable economic and political news: UK real wages falling, the Eurozone GDP at best flat and Germany shrinking, wars and rumours of wars in Ukraine and the Middle East (Syria, Gaza, Iraq) and political instability in France, the attraction of commercial real estate has been, at the very least, maintained.
In the UK we have seen continued activity across the asset quality spectrum and across the capital stack. By way of examples I would pick the sale of Max Property’s entire business to Blackstone at a 22% premium to net asset value and the acquisition of Woolgate Exchange by Cathay Life, the Taiwanese insurer, from TPG Capital and Ivanhoe Cambridge for £320 million, compared to its last transaction price of £260 million in February 2013. In the capital sphere the pricing of the Westfield Stratford £750 million CMBS at a spread of 75bp sets a new post-crisis low. This process of capital flow towards real estate does not seem to be over with reports of in excess of 200 registrations of interest in 30 St Mary Axe (despite pricing expectations in excess of £600 million) which is being brought to the market by the receiver.
CBRE's Neil Blake and Graham Barnes analyse the latest macroeconomic and capital markets factors that shape and influence commercial real estate markets in the UK, providing two views of one world.
This month in An Economist and A Financier: Optimistic summer outlook with corroborating evidence in the property market. But is there a danger of complacency? Threat from high interest, stuttering growth outside the UK, the continued weakness of public finances, weak wage growth, sluggish bank lending to companies, deflation and the lack of evidence of rental growth outside of London and the Greater South East are some of the concerns worth thinking about.