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Monday Market Memo | Hotel Brexit Boom, Madrid’s HOT property market & the world’s most unaffordable cities

February 5, 2018Article by Paul Avery

HOTELS PROFIT FROM BREXIT

Research firm STR has released rosy UK hotel sector data for 2017. Nationwide average occupancy edged up 0.5% to 77.4%, with average daily rates rising by 3.6% to £92.32, meaning that revenue per available room (the industry’s key metric) grew by a stellar 4.1%, to £71.49. The favourable exchange rate brought a surge of inbound visitors, while curbing outbound trips by Brits and shoring up domestic demand. But Brexit-boosters should note that continental Europe’s equivalent RevPAR growth was even higher – at 5.6%.

IRELAND’S SELF-DEFEATING BOOM

Tight supply is the primary cause of a boom in Irish property, but it is also proving a threat to Dublin’s Brexit dividend. Residential prices across the Isle soared by 11.6% in the year to November with rents up 6.7% in nine months, as just 8,659 of the 25,000 homes it needs each year got built. Similarly, grade A office rents in the capital now stand at €678 / sq. m., well above the post-crash level of €305. With 17 major institutions, including S&P, Legal & General, JP Morgan, Bank of America, and Barclays looking to expand their presence post-Brexit, Dublin’s value proposition is sounding less convincing.

MADRID HEATS UP

With Catalonia still in the doldrums, Madrid’s residential market is having all the fun. Sales volumes grew by 50% in the year to October, with prime prices up more than 10% over the same period as workers hotfoot it from Barcelona. Rents are reported to be nearly a third more expensive than they were just two years ago – a rare case in which yields are outpacing strong capital growth, causing a spike in interest from first-time landlords.

WHOA-OH, BACK TO THE ISLAND

Foreign buyers are returning to the Caribbean as post-crisis price cuts of around 30% appear to have bottomed out and multi-million-dollar villa sales tick up. Prime properties on St Barts and Mustique have seen a return to popularity among Chinese and American buyers tempted by affordability and lifestyle factors, while the tax advantages of the Bahamas remain attractive. The concept of safe haven assets in the Caribbean has survived 2017’s particularly intense hurricane season as the perception of good value drives inquiries.

UNSURPRISINGLY UNAFFORDABLE CITIES

An annual survey of housing affordability in global cities named Hong Kong, Sydney, and Vancouver as the three least affordable cities relative to earnings. Of the 92 major metropolitan markets included in the study, just ten are ranked as affordable (all are in the United States), and 28 are ‘severely unaffordable’ (including every city in Australia).

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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