The Times | December 28, 2005

House price rally defies the huffers and puffers
BY GABRIEL ROZENBERG, ECONOMICS REPORTER

PREDICTIONS of a property slowdown have faded away, with analysts almost united today in declaring house prices to be on the rise again.

Gloomy forecasts at the beginning of 2005 have gradually been reversed during the year with the last major price monitor coming into line by reporting an above inflation rise.
A report today from Hometrack claims that house prices are rising for the first time in 18 months, with prices 0.1 per cent higher in December.
The significance of the announcement is that Hometrack has been the most gloomy of all the house price monitors over the past year. With today’s report, all the indicators are pointing in the same direction: up.
As the year draws to a close, it provides an opportunity to paint a picture of the path of house price movements.
Figures from the Nationwide and Halifax, the mortgage lenders whose reports are seen as among the most authoritative, show that despite the doom and gloom of a year ago, prices have actually risen above inflation over the past year – though admittedly not by a great deal.
Nationwide sees property values increasing by 2.4 per cent in the 12 months to November, after rising in every month bar one this year. Halifax is more bullish, recording a 4.5 per cent rise in the year to November, after a year in which falls recorded early in the year have been counterbalanced by a buoyant performance since August.
Of the two surveys, Halifax has about a 20 per cent market share, and Nationwide has a 10 per cent share, and each has its own system for adjusting for differences in location and property characteristics.
But both are roughly comparable as they are wellestablished studies that measure prices at the mortgage approvals stage. Hometrack, a website, measures prices at the same stage.
Rightmove, another website, measures prices at around three months earlier in the process – at the point at which would-be buyers put down their asking prices. It therefore claims to be the first study to spot trends, although it may be less accurate as a result. Rightmove says that asking prices rose by 3.4 per cent this year, in line with the consensus.
A different approach is taken by the Royal Institution of Chartered Surveyors (RICS), which asks its members whether house prices have risen or fallen and constructs an index based on the balance between the two.
This has also been more gloomy than the standard surveys. Those who expected house prices to plummet argued that the RICS painted a more accurate picture as it picked up the prices of houses that were unsold as well as those that were sold, which could well be skewed towards more expensive homes as first-time buyers held back.
The Land Registry publishes authoritative quarterly reports which average all the final selling prices recorded in its books. Its data is generally considered to lag behind the commercial studies by around two to three months.
The Land Registry figures show that in the first half of 2005 prices in England and Wales were roughly flat, before rising by a healthy 5.2 per cent in the third quarter.
The overall picture has now become fairly clear. In 2004, the house price boom finally came to an end: but what replaced it was 12 months in which prices stagnated rather than slumped. And by the end of 2005 the market was starting to look rather more healthy, although no one was predicting a return to rapidly rising prices in 2006.
The clearest sign of the change has come from Roger Bootle, whose consultancy Capital Economics has been one of the City’s most vocal prophets of a house price slump.
At the start of this year Mr Bootle wrote in a report for Deloitte: “We continue to expect house prices to drop by a total of 20 per cent or so over the next two years, but a bigger fall cannot be ruled out.”
But last week, Capital Economics announced a “forecast change”: noting the lack of a sustained fall in house prices in 2005, they now predict house prices to drop by just 2 per cent in both 2006 and 2007.
A drop of 5 per cent in prices in the next two years would be unwelcome, but would not have a deep impact. This is the way the great house price crash that never was has ended: not with a bang but a whimper.

Property Week | 25.11.2005
Buy-to-let syndicate targets Olympic residential investors
UrbanShare Residential Investment Fund aims to capitalise on boom in Docklands market

Private investors looking to take advantage of an expected property boom around the Olympic Games site have been given the chance to become landlords with the launch of a buy-to-let property syndicate.

The fund, called the UrbanShare Residential Investment Fund, is the brainchild of property entrepreneur Richard Klin, a well-known private investor and residential landlord in London’s East End.

It aims to acquire around 70 houses and flats comprising at least three bedrooms and located within a 15-minute commute to Canary Wharf or Stratford. The properties will then be refurbished and let on a flat-share basis on six-month assured shorthold tenancies.

Rents will rise in line with the Retail Prices Index at each renewal.

The scheme has been inspired by the growing demand for short-term but high-specification housing in Docklands, from graduates who have moved to London to complete a training placement or start their first job, and from more senior professionals seeking temporary accommodation after a relocation.

Klin and Real Estate Associates, the fund’s Financial Services Authority-authorised operator, will select properties they believe have the potential to generate a 10% annual yield.

‘The UrbanShare fund is designed to exploit a real arbitrage of opportunity in this part of London,’ said Klin. ‘The area is full of undervalued housing stocks, in spite of growing demand for accommodation and compelling prospects for future capital growth on the back of the Olympics and the expansion of Canary Wharf. The unitised structure of this investment means that private investors can gain exposure to this growth without taking on the risk and management problems associated with individual buy-to-let investments.’

The fund is targeting an annual 8% priority return based on rental income. Any capital growth will be distributed when the portfolio is sold off at the end of the fund’s life.

The investment will be structured as a limited partnership and will be wound up in April 2012, unless 75% of participants agree to an extension. The fund hopes to raise Ł4m of equity from investors in minimum tranches of Ł12,500.

The opportunity is open to SIPP (self-invested personal pension) and SSAS (small self-administered scheme) investors.

The fund will be invested on a ‘blind’ basis, but Klin is confident he can find enough suitable assets to make UrbanShare perform.

Klin added: ‘We’ve done a lot of research to identify strong sources of properties, and we have built up solid relationships with all the local agents.

‘One of the advantages of knowing an area so well is you come to understand where most of the market activity is.

By Sinead Cruise

The Sunday Times – Property
http://www.timesonline.co.uk/article/0,,2098-1683609,00.html

The Sunday Times | July 10, 2005

London : Property is Games’ first winner
The capital’s estate agents are in the mood to celebrate the Olympic bid, as demand for flats in Stratford surges and the whole city looks set for a market boost, says Karen Robinson.

The jubilation at last week’s announcement that London will host the 2012 summer Olympic Games was led by politicians and sportspeople. But long before any athletes strive for medals, the Olympic bid had its first winners — buyers who had the foresight to invest in property in Stratford, east London, where most of the events will take place.

The Olympic dream had already caused the local property market to outperform the rest of the country. “The bid put Stratford and east London on the map,” says Barbara Goldsmith of Stratford Properties, a property consultancy, who started investing there about five years ago. “And over the past few years property prices have been rising way ahead of the national trend, reaching 40% annual increases. Over the past year it has settled and slowed, along with the rest of the country — but now my phone is ringing non-stop with people looking to invest.”

Regeneration in Stratford, part of Newham, the country’s third most deprived borough, is now underway, and by 2012 there will be 10 train and Tube lines, including a seven-minute shuttle from St Pancras, within walking distance of the Olympic Park now taking shape on a derelict brownfield site. As well as the legacy of the Olympic facilities — the athletes’ village will be turned into affordable housing — the Stratford City project, now under construction, will create a shopping centre, 5m sq ft of commercial premises and 4,500 new homes, 30% for key workers and social renters.

Eddie Maddox, a bank manager from Billericay, Essex, bought a one-bedroom flat at The Mill, a new Barratt development, for £190,000 in 2004, attracted by the regeneration plans. The last time he had it valued it had already increased to £212,000, and he says that, thanks to the success of the bid, “I would have thought it has made another few per cent.” And while finding tenants has not been a problem so far, he is confident that as work for the Games gets underway, there’ll be no shortage of people renting in the area.

Barratt’s Stratford Square development close to the town centre has one-bedroom flats with balconies from £217,000 and two-bed, two-bath units from £282,995. Developer Bellway has apartments for sale in The Lock in Blaker Road, near the Pudding Mill Lane DLR station, where one-bedroom flats start at £205,000 and two-bedders at £260,000.

You can still get a one-bedroom flat in the area for £125,000, according to Mohammed Bangladesh of Senator Estates, a local agency, but such properties will not stick around for long. Within minutes of the bid announcement, he says, “I got a couple of calls. They didn’t want to bargain, they wanted to go with the asking price.”

Clive Fenton, southern chairman of Barratt, says: “Even without the Olympics, property observers have for several years flagged Stratford as an up-and- coming place, not least because it sits neatly between Docklands in the south and the City to the west. It has become the public transport hub of the eastern half of Greater London, with mainline, Tube, DLR and a bus network centred on Stratford. And shortly it’s going to get a Eurostar stop. These things — along with the success of Canary Wharf and Docklands — have shifted London’s centre of gravity to the east.”

And it’s not just the Stratford area that will benefit, if past Olympic-city performance is anything to go by. The last four hosts — Athens, Sydney, Atlanta and Barcelona — all saw property prices outperform their national markets in the five years leading up to the Games, most impressively in Barcelona where prices increased 49% more than in the rest of Spain. In Sydney the differential was 11%, Athens 9% and Atlanta 6%. Even the 2002 Commonwealth Games in Manchester were preceded by a 102% price increase over five years, compared with 83% nationally.

Geoff Marsh of London Property Research sees the Olympic effect spreading throughout the capital. “It’s difficult to see anything other than a massive boost to confidence in the residential market. Confidence is the one ingredient missing in the London market at present. We could have a ‘golden scenario’, in which the Olympics bring private investors back to the market and institutions join the fun, through pensions and investment trusts. Employment will grow faster than was already happening, and interest rates do now look set to trend down, certainly not up. And,” he adds, “ London’s ‘ World City’ image will be enhanced, which is essential for the lettings market.

“The improved infrastructure spend will provide a short- and long-term boost to the locations which benefit most,” Marsh says. He divides the areas into “short-term winners”, which are the obvious beneficiaries in terms of proximity to the main Stratford/Lower Lea Valley sites, and the “quiet” winners.

The short-term winners, along with Stratford, he says, will include Bow, which is in the throes of a huge redevelopment programme, replacing failed council estates with mixed- tenure developments. “Bow is still very competitively priced for inner London. And Canning Town, still a dump, where development has been very limited.”

The main “quiet winners” look likely to be “locations on the North London line, which is a surprisingly useful service, albeit dirty and dilapidated, linking into Stratford from east (North Woolwich) and west ( Richmond, Camden Town). Hackney, Dalston and Hoxton are particularly well set. They will benefit hugely from the East London line extension.

“Other slightly more distant locations in the Thames Gateway, such as Barking and Purfleet, will become more plausible as locations for very large-scale development and regeneration than they currently are.”

But, warns Marsh, the coming of the Olympics is not all good news. “Construction costs will get even more out of control, and many Londoners will be living on a building site for the next seven years.”