“Last year, the UK commercial property market started with some signs of renewed optimism but in truth, by the mid-year, the only question on our minds was whether the euro would survive, and if not, what impact would that have on the UK, commercial property values and our industry. It is still not clear what the future of the euro will be although it seems increasingly likely to involve some members leaving the eurozone,” he says.

“However, the problems arising out of the exuberance of the last economic cycle are now giving rise to the opportunities in the next, as banks continue to deleverage their exposure to UK commercial property and more experienced investors look to buy commercial property investments outside of London and the south-east.”

According to the December factsheet of the £388.9m Threadneedle UK Property fund, managed by Don Jordison and Chris Morrogh, the portfolio was overweight in London and the South East, with 35.9 per cent in shops. Compared with its IPD UK Monthly index benchmark, the fund was significantly underweight offices at 22.8 per cent, a deviation of 8.1 percentage points.

Investors could be forgiven for struggling to understand where to invest in UK property, given the severity of falls in UK commercial property values in 2008/09. However, they should not lose sight of the positive 8.1 per cent 12-month return from the IPD Property index, or that the volume of commercial property transactions in 2011 was in line with the historic annual average of £30bn.

Mr Clark adds: “Some institutional investors are starting to see the compelling opportunity to take the place of banks in lending to good quality properties and experienced property investors. There are also substantial opportunities to secure attractive income returns, often let on index-linked long leases, from ‘alternative’ property sectors such as sale and leasebacks, ground rents, healthcare, ground rents and student accommodation, to name a few.”

Royal London Asset Management’s Property fund manager Stephen Elliott agrees: “Long income deals such as supermarket sale and leasebacks and distribution warehouses were also popular as investors sought ongoing income. However, supply of this quality of stock was limited and therefore attracted considerable interest. Foreign buyers mainly restricted their purchases to central London, both retail and offices, with a trend towards Asian investors snapping up the larger stock.”

The best-performing fund in the IMA Property sector in three years to January 31 is the £62.8m First State Global Property Securities fund, managed by Andrew Nicholas and Marco van Bussel (see page 46 for an in depth analysis), which returned 79.73 per cent compared with the sector’s 38.84 per cent.

The fund invests in a broad selection of securities issued by real estate investment trusts or companies that own, develop or manage real property from around the world. As of December 31, the fund had 61 per cent allocated to North America, just slightly underweight compared with the UBS Global Real Estate index at 61.7 per cent.

The fund is overweight Asia Pacific ex Japan, with a 18.3 per cent weighting compared with the benchmark’s 17.5 per cent.

Commercial property markets in Europe, however, have struggled to keep pace with other parts of the world. According to the latest Royal Institution of Chartered Surveyors (Rics) Global Commercial Property survey, rental predictions were in negative territory across much of Europe, with the noticeable exception of Germany.

However, rental expectations remain positive in eight of the countries surveyed, with respondents in China, Brazil, Russia and Canada among those saying rents will rise, not fall. In each of these markets fresh demand for space continues to outstrip new supply which reflects the relative resilience being displayed by these economies.

On the investment side, it is the same four countries (China, Brazil, Russia and Canada) where expectations for capital values are strongest, while across Europe sentiment is downbeat. Interestingly, the revival in transactions is expected to persist in the epicentre of the last property crisis, the US, in spite of concerns about the outlook. Investors might wish to bear in mind that regarding the outlook for future sales, surveyors in the US reported the strongest reading of all.

Source: The Financial Times Limited

Details of the deal are not being made public but it is understood that the Queen’s bean-counters will pocket a six figure sum.

Documents submitted to Kensington and Chelsea council reveal that the Queen’s treasurer, Sir Alan Reid, signed a contract with wealthy Russian businessman and Chelsea fan Sergei Kolushev back in August.

The deal is part of a drive by Buckingham Palace to supplement the Queen’s income as a new Government scheme to manage royal funding is put into place.

The first payment will be for £31 million but there are continuing fears that this will not be enough to cover the huge backlog of essential maintenance work needed by many royal residence, which are held in trust by the Queen on behalf of the nation.

Palace officials have come up with a series of money making ventures, including renting out the State Apartments at St James’s Palace for the first time.

They are insistent, however, that nothing must be done to ‘tarnish’ the Queen’s name – and have forced the Russians to sign a contract stating that they will do nothing that ‘may affect of damage the reputation, image or standing….of the royal family, royal household…Kensington Palace or any occupied or unoccupied royal palace or residence.’

Any breach of this could result in the loss of their £250,000 deposit.

Event organiser Eventica plan to erect a giant double-deck marquee as part of a Russian cultural festival featuring a stage, sponsors’ tent, catering and picnic area and bar.

A Buckingham Palace spokesman said: ‘The renting of Perks Field is a way of managing and adding to the budget of the Sovereign Grant over the next three years.’

Source: Mail Online

New figures from Zoopla.co.uk, an online valuation service, say 26,744 more home owners had properties worth £1m more at the end of 2011 than at the same time last year, although the average British property value fell by 3pc to £221,128 over the same period.

“High prime demand” from equity-rich buyers and relatively low supply of large homes had created 73 new property millionaires every day in 2011, Zoopla said, and one in 108 homes was now worth £1m or more; at the peak of the property market in 2007 the figure was one in 97.

There are now 253,118 homes valued at more than £1m in Britain, the research found. The biggest rise in the number of property millionaires was in London, where the number grew by 18pc over the past year. Four in five homes worth more than £1m in Britain were located in London and the South East, with London accounting for more than half the national total (55pc).

London was also home to nine of the top 10 areas in Britain. The area with the highest proportion of £1m homes was Kensington W8, where 56pc of all homes were worth more than £1m. The only area outside London making the top ten was Virginia Water in Surrey, where 30pc of homes were worth £1 million or more.

Nick Leeming of Zoopla.co.uk said: “This data shows clearly how differently the top end of the market is performing from mainstream Britain.

Source: Telegraph Media

Prime property prices in London rose 0.7% in October and 0.6% in November, continuing the strong performance seen in this sector of the market throughout 2011, and bringing annual growth to 12.5%. Prices are now nearly 40% higher than their dip in 2009 and over 5% above their previous peak in March 2008. Even within areas that have seen strong growth it is the highest quality properties that are driving the market as buyers focus on acquiring the very best properties available. For the 6 years to the end of November, the best performing 10% of prime central properties have seen growth of over 150% compared to the still impressive yet significantly lower 42% growth for the bottom 10%.

In Belgravia smaller properties with 2 or fewer bedrooms, especially flats, have seen strong growth over the 3 month period to the start of December with the average asking price rising by 19% for flats and 2 bedroom properties rising by 29% compared to lower single digit growth or marginal contraction for the larger properties. In central London as a whole, larger properties are performing strongly with average asking prices for 5+ bedrooms rising 8% over the past 2 months from roughly £6m to over £6.5m. In terms of the types of property being the most sought after, lateral conversion, first floor flats penthouses and low built houses are reaching in excess of £3,000 per sq ft up to £5,000 per sq ft for where there is intense buyer competition.

The dominance of international buyers who do not rely on borrowing to fund their property purchases continues and the range on nationalities represented broadens. Beside the desire for a financial save haven, the growing population of foreign nationals in London means that many already have networks of family, friends, and business acquaintances here. Foreign nationals now represent 58% of all buyers, with 20% buying purely for investment and less than half to use as their primary residence.

Especially voracious demand has been seen over the last two months from wealthy Greek residents desperate to protect their wealth from the instant fall in their spending power that would follow Greece leaving the Euro. The prospect of political instability in Russia following the elections next year has also driven more Russians to expatriate their wealth and buy prime London property. Recent scenes of protesting will only serve to increase this capital flight from Russia. The other major investors, those from the Middle East, also continue to be active as 2011 draws to a close, with the impact of the Arab Spring still running its course.

The growth of the wealth of the richest people was highlighted in the World Wealth Report, which indicated that there are now 20% more billionaires than at the start of 2011. Many of these new billionaires are viewing London as a stable place to invest. Due to the weakness of the pound, prices for many international buyers are still below their 2008 peak. In the 18 months to the end of November it is estimated that the net inward investment in prime London property has reached £6 billion.

Some reports have indicated that small numbers of investors, especially Russians who have been holding prime London property assets for a while, have started to release some of this capital in order to diversify their assets and take advantage of other opportunities. Although this trend is not expected to accelerate, the caution that it represents does lead to predictions that growth will not reach double digits in 2012.

Usually over these coming winter months investment bankers and hedge fund managers become more active, with many analysts estimating that a third of the money received as bonuses is invested in prime London property. This year however bonuses are expected to be 40% lower than last, with 27,000 jobs being lost by the end of 2011. The combination of weakened domestic demand and greater caution from international buyers makes growth expectations more modest for the next 5 years. Predictions for 2012 range from 3-5%, with only marginal growth in 2013 before rates of growth improve in 2014 to 5% as the global economy accelerates, and reaching 6.5% in both 2015 and 2016. The total growth for the coming 5-year period is expected to be between 22% and 24%. For those investors who are not buying properties for themselves to live in, the forecast for rental growth over the same period is 27.6%.

The weakening of domestic demand combined with continued strong interest from international buyers is likely to polarise growth rates over the coming year with the more peripheral areas favoured by domestic buyers unlikely to fare as well as the more central prime properties which are more attractive to the cash-rich international investors. Kensington, Chelsea, Belgravia, Mayfair and Knightsbridge should continue to grow strongly and may reach £10,000 per square foot over the next few years. The double-digit growth seen in 2011 was not expected and the conservative predictions for 2012 my again have been too cautious if the influx of wealth from countries experiencing political or financial instability continues and the attention of the world focuses on London for the Olympic Games.

Ashton Rose

However, this national figure masks significant price variations in regional locations, with some areas experiencing much larger falls in property values.

“Most people would be forgiven for thinking that house prices have perhaps dipped a little, but that is only because of the London effect,” says Henry Pryor, a housing commentator.

Figures from the Land Registry show that average prices in London rose by 0.3 per cent in the year to October, the only region to experience an increase in its annual price change. But it was prime London that held the market up: prices in Kensington & Chelsea rose 10.1 per cent, while those in the Olympic borough of Newham rose 1.4 per cent, but nearby Haringey and Waltham Forest saw falls of 0.7 and 1.6 per cent respectively.

Outside the capital, prices fell further: by 3.1 per cent and 4.1 per cent in East Midlands and West Midlands, respectively – and by as much as 7.2 per cent in the North East, which saw the biggest annual decline.

Many areas are still seeing prices significantly below their peak in January 2008. While average prices across England and Wales are 12 per cent below their peak, prices in Peterborough are 20 per cent and prices in Hartlepool as much as 30 per cent down, points out Pryor.

Constrained availability of mortgage finance continues to be a major factor in the mainstream market. “After peaking at £363bn in 2007, gross mortgage lending fell off a cliff by 2010 and was down to £136bn,” says Ray Boulger of John Charcol, the mortgage broker. This year, the Council of Mortgage Lenders estimates that gross lending has been only slightly higher at £138bn.

While, on paper, mortgage choice improved slightly this year, as fixed rates fell to record lows and more high loan-to-value deals became available, the number of mortgage approvals has remained depressed – amounts advanced in 2011 were about half the total at the peak of the market.

Eurozone debt worries weighed heavily on the market in the second half of 2011, pushing up the cost of borrowing for banks, which passed on their higher costs to new mortgage borrowers. “This has resulted in the cost of many new tracker and short-term fixed-rate mortgages increasing by about 0.5 percentage points over the last couple of months, with some lenders increasing rates five times – albeit by small amounts each time,” notes Boulger.

Tight mortgage availability has driven more buyers into the rental market, pushing rents higher – a growing trend in 2011. “The continued shift to renting is key, as the whole structure of the housing market continues to change,” says Lucian Cook, director of residential research at Savills.

Source: The Financial Times Limited

Europe may be beset by economic gloom, but one prominent Frenchman has shown his confidence in Britain as a safe haven with an eye-catching property deal.
François Pinault, who founded PPR, the luxury goods company that owns fashion labels including Gucci and Stella McCartney, has paid £20 million for a house in Chelsea, south-west London.

The price may rise eyebrows, as it only has two bedrooms, but it does have other advantages.
Pinault, whose son, François-Henri, is married to the Hollywood actress Salma Hayek, is now planning a programme of alterations to the Queen Anne revival property, which was cast as the bachelor pad of Richard Griffiths’s character, Uncle Monty, in the cult 1987 comedy film Withnail and I.

“It is the most stunning house,” said one of Mr Pinault’s new neighbours. “Although it has only two bedrooms, it has one of the few triple-height ceilings in London.”

The house was designed in 1868 by Philip Webb, the “Father of Arts and Crafts architecture”, for the watercolour painter George Price Boyce.
It was previously owned by Professor Bernard Nevill, the eminent aesthete, who was the design director of Liberty during the Sixties and Seventies. He is understood to have paid £80,000 for the property, giving him a profit of £19.92 million.

Mr Nevill is said to have spent more than 30 years “perfecting the interiors” of the property.
That has, however, not deterred Mr Pinault, 75, from submitting a planning application to Kensington & Chelsea council to improve the house, which is where the Society for the Protection of Ancient Buildings was founded.

The magnate, who is a friend of the former French president Jacques Chirac, proposes the “reinstatement of original features such as the main staircase” and plans to redesign the bedrooms, kitchen and bathrooms.

Joinery will be removed and new windows will be fitted to the vast studio.
Mr Pinault, who owns the Château Latour wine estate, is one of France’s two richest men. He possesses one of the biggest collections of contemporary art in the world and has collected works by Damien Hirst.

In 1998, the tycoon, who owns two art galleries in Venice, bought a majority share of Christie’s auction house.
Among the neighbouring properties in Chelsea is the Jamahiriya School, which was owned by Colonel Muammar Gaddafi’s Libyan regime. The one-acre property was recently sold for £85 million to Orion Capital.

A spokesman for Mr Pinault declined to discuss the purchase, but said “he intends to remain a French fiscal resident”.
The sale is further evidence of the strength of the London property market, which is being especially fuelled at the top end by foreign buyers.
Last year they were responsible for an estimated £3.7 billion of property transactions, many of them well into double digit millions of pounds.
Upmarket estate agent Savills estimates that 40 per cent of the value of the London housing market’s transactions now comes from abroad.
Areas including Belgravia and Chelsea are now dominated by foreign buyers, many of whom live in their properties for only small parts of the year.
They have also led to a mini-boom in the building industry, with many leaving only the facade intact as they extend basements, install underground rooms, swimming pools and parking, and entirely rebuild interiors.

Source: Telegraph Media

Prime central London residential values are now 15.6% over their peak level, with price growth expected to top 13% this year and rise by 22.7% over the next five years, according to Savills residential research.

In the short term, further, though slower, growth is expected in 2012, with a short lived downward blip in the final quarter that will leave values just 3% up in the year. Growth is expected to resume after 2013, supported by London’s strong global city fundamentals and an improving domestic economy.

By contrast, the UK’s prime regional markets have not benefited from a ripple of equity from the capital and are on average 16.6% below peak and falling. These markets, which remain dependent on domestic wealth generation and relocation from London which has been weak during the recent recovery, are expected to show falls of around 3% in 2012. Growth is expected to resume in 2013 with a particular bounce back in the South East and total five year UK growth to average 15.1% by the end of 2016.

Prime London is itself dividing, with the more domestic markets of southwest London and locations such as Islington starting to see softening demand due to weakening prospects for city generated wealth, with little prospect of a fillip in the form of bonus cash in the near term.

These markets are currently 6.7% and 6.9% above peak respectively, and as the outlook for London’s economy weakens so growth is slowing and they are expected to perform more in line with the prime South East than prime central London over the next year to 18 months.

‘The price growth seen this year in prime central London does not make sense in the context of the UK economy, but must be viewed in a global context,’ said Yolande Barnes, director of Savills residential research.

‘Central London’s residential real estate is increasingly behaving as an asset class, more closely linked to global wealth generation than any domestic indicators. It is clear that international buyers are buying a safe haven store for their wealth, some are also making a currency play on cheap sterling. In the past 18 months we estimate that net inward investment by international buyers has totalled around £6 billion,’ she explained.

‘The question is how long this can continue. Further growth is dependent on prime central London continuing to defy or even benefit from the pressures on the global economy. On balance, we believe the influx of global wealth in uncertain times still has some time to run and it may even be boosted by the international attention focused on the Olympics. The fundamentals of this market, particularly its finite supply side, remain in place for as long as London retains its global city status,’ she added.

She pointed out that prime real estate has proved itself a stable safe deposit in uncertain times and in an investment world searching for yield and security the five year outlook for prime property is compelling.

Over the next five years prime central London residential real estate is expected to outperform many commodities markets and perform in line with West End offices and UK gilts, with additional rental growth forecast to increase 27.6% from 201 to 22016 on top.

But prime regional values across the UK as a whole have been slipping. Values are currently averaging 16.6% below peak, behaving more in line with domestic markets. This makes them look particularly good value in relation to prime London and Savills believes that this will contribute to a catch up over the mid term.

Five year growth is forecast to total 15.1%, significantly lagging London and the South East, but outperforming the UK mainstream which is forecast at 6%.

Despite the widening price gap between London and the country, Londoners seem increasingly reluctant to move out and there has been a 24% drop in such relocation activity, meaning that values in the South East are still 12.5% below peak and will only turn upwards as the economy begins to recover. At this point, Savills forecasts a London and South East centric recovery resulting in five year growth of 21.3% in the South East.

The markets that are completely divorced from London have so far been the slowest to recover and will continue to underperform showing falls in 2012 with the Midlands and the North down 6% and Scotland 4% with lower five year growth of 7.3% and 7% respectively. The prime South West markets, particularly Devon and Cornwall which benefited from high levels of discretionary wealth in the boom years also remain well below peak and will require further discounting before growth can resume.

The Savills central forecast assumes negligible short term growth in the domestic and Eurozone economies, but does not attempt to anticipate the impact of a major financial event, for example the collapse of the Eurozone.

‘Such events are impossible to forecast, but it is clear that all short term forecasts, not only for real estate, would be rewritten in such an event. The wise investors will be those taking a mid term, five year view and not those banking on the short term,’ said Barnes.

Source: PropertyWire

The company hopes to start marketing London homes in Greece in the coming weeks at prices from 250,000 pounds ($398,940), below the price bracket of the wealthy, many of whom have already moved money into London property.

It plans to enter partnership deals with Greek companies to sell properties valued at up to five million pounds, Jones Lang LaSalle residential director Tim Wright told Reuters. For homes above five million the buyer typically travels to view the property for themselves, Wright said.

“We want to find a route to market as quickly as possible,” he said. “We will gauge if people’s appetite is as high as we have been led to believe anecdotally. We will dip our toe in the water with areas like Kensington and Chelsea and move to less exclusive parts of London if demand is deep enough.”

The number of wealthy Greeks looking for London properties has soared since the summer’s economic turmoil, real estate brokers and developers said.

They are part of a growing number of overseas buyers of expensive central London homes who are attracted by the stability of the market and relative weakness of Sterling.

About 55 percent of central London homes bought for more than two million pounds were taken by foreign buyers in the year to end-September, up from 49 percent a year earlier, said property consultancy Knight Frank.

Source: Thomson Reuters