Take last week’s Land Registry figures at face value and the residential sector is clearly in the doldrums. Average house prices in England and Wales have fallen 2.5% year-on-year, with the North East’s 7% decline leading the downwards charge. In April, the most up-to-date figures available, the number of completed house sales fell 7%.
Read the figures another way and, given the economic turmoil elsewhere, resi is in decent health. Values in London rose 0.8%, a figure dwarfed by Wales, where values climbed 2.8% month-on-month.
Meanwhile, the number of properties sold in England and Wales for more than £1m surged by 45% in the year to April 2011.
So what to conclude, especially as residential property statistics have a deserved reputation for casting more shade than light? Well, it’s a two-tier market undeniably. In Wales, one encouraging month’s performance does not mark a full-blown recovery.
Contrastingly, London’s sub-1% growth may appear muted, but dig beneath the surface and there are some startling statistics. Prices in Kensington and Chelsea, for instance, rose 6.6% year-on-year. Even at that rate of growth, average prices in the borough would top £1m within 18 months.
And don’t be surprised if that milestone is reached sooner, given the appetite for high-end residential there. Orion Capital Managers this week bought a one-acre freehold site in the borough and is planning a £300m Foster + Partners-designed resi scheme. The ambition is to create a development that would rival the Candy brothers’ One Hyde Park as the most expensive flats in the world.
But away from that stratosphere, there are signs of underlying, fundamental reasons for confidence in the wider residential market. Ground rent management firm Dorchester has teamed up with Aviva Investors for a £250m fund. They see residential ground rent investments as offering low-risk, secure and long-term cash flows.
And there are signs that institutional investment may finally reach the private rented sector to a meaningful degree. UK Regeneration is working with Barclays Capital on a fund that could trigger as much as £3bn of investment. Others are poised and could reveal their hand as soon as the autumn.
Speaking of London and security of investment, another new investor with pots of money is moving into the capital’s offices market. As EG reveals this week, Stena Realty has acquired the freehold interest in 100 Leman Street for £31m at a 7.8% yield. Its significance should not be measured by the size of this deal. Instead, bear in mind parent company Stena (best known for ferries here) is the second-largest in Sweden and has a long-established interest in property. This is its first UK deal. More from Stena will follow, as will others in its wake.
Many thanks to the hundreds of you who have downloaded the first Estates Gazette iPad Special Edition. Commiserations to the rest of you who are missing out on what should be essential reading. Coinciding with the Olympic brouhaha, this iPad edition focuses on the legacies of major sporting events.
As attention turns from delivery to legacy in Stratford, we have reports from video journalists in Beijing, Athens and Sydney on the regenerative impact of previous Olympics. We don’t neglect the UK either, with a video report from Manchester on the impact of hosting a Commonwealth Games and another from Glasgow on its preparations for the 2014 competition. To access the app visit the App Store or go to www.estatesgazette.com/sporting-legacies, where those of you without an iPad can view the videos in our digital magazine.
