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Monday Market Memo | Supply pressures hit US, Ireland and London, while investors hit the slopes

March 5, 2018Article by Paul Avery

LONDON SALES STALL

Profits at Foxtons, a leading London estate agency, fell by 65% compared with 2016 on the back of sales activity in the capital withering to ‘near historic lows’. Dismayed by slumping prices, London owners are increasingly opting not to sell. They are sitting on a gargantuan pile of equity, with a recent Zoopla study reporting that property in the capital is worth £1.5trn – more than double the combined value of the nine next most valuable UK markets.

LUCK OF THE IRISH HOMEOWNERS

Property prices in Ireland are through the roof, with fresh statistics showing 12.3% growth in 2017. Apartments in Dublin were the top segment, climbing by 14.7%. Average values across the country are now 72.1% higher than their trough in 2013 but remain at least 20% lower than their 2007 peak. The worst performing area last year was Dún Laoghaire-Rathdown, which still managed an enviable 9% increase. Affordability is fast becoming a serious problem as supply fails to meet demand.

TIGHT SUPPLY RESTRAINS US SALES

Pending home sales in the US dropped by 4.7% in January, hitting their lowest point in nearly four years. The sudden contraction is chiefly due to the tight supply of homes for sale: the number of listings was down 9.5% compared with 2017, and the lowest figure since records began in 1981. A secondary reason is higher mortgage interest rates, which Jerome Powell suggested would intensify in his first testimony to Congress as the new chairman of the Fed last Thursday. The Case-Shiller National Home Price Index ended last year 6.3% higher than 2016.

DON’T LOOK DOWN (UNDER)!

Sydney house prices have fallen for the first time in six years, heralding the end of one of the world’s longest-lasting and steepest market gains. Regional Australian markets have fallen out of sync, with Hobart still rocketing along at 13.1% y-o-y, expensive Melbourne steady at 6.9%, Perth down 2.7%, and Darwin dropping 7.4%. Sydney fell by just 0.5%. What comes next is hotly contested: The IMF has projected a ‘soft landing’, while American economist Harry Dent has apocalyptically predicted that values will plummet by 30-60% after the stock market implodes ‘just weeks from now’ and leaves one in three Australians unemployed. The former seems more realistic.

MARKET PEAKS

A new skiing property index, which takes piste area and weather patterns into account in addition to home prices and supply, named Chamonix as the best investment location in the French Alps, with a total score of 18 out of 20. Chamonix also led Knight Frank’s purely price-based index for 2017, with 4.8% growth over the year.

 

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Author

Paul Avery

Paul joined us in 2016 to lead our in-house research efforts, producing reports and guidance for clients as well as the strategic market analysis behind our new project launches. His background is in sustainability in the construction sector, and he is currently being trained in property valuation to further bulk up his investment creds.
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