The enduring appeal of waterfront living
Making sense of the latest trends in property and economics from around the globe.
4 minutes to read
The 'escape to the country' trend might be fading amid the resurgent appeal of cities, but the draw of waterfront properties remains largely undiminished.
Homes by the water were worth 48% more on average than equivalent non-waterfront properties in Q2 2023, dipping from 50% a year ago, according to the latest Knight Frank Waterfront Index.
The largest average premium for a property is next to a lake or loch, with an uplift of 71% in Q2 2023, unchanged from last year. Coastal homes took second place, with an average premium of 66%. In third place –down from joint-first position last year - was estuary, attracting an average premium of 64%.
These markets have a higher prevalence of cash buyers, making them less responsive to rising interest rates. More than half (54%) of UK waterfront property buyers purchased in cash in the last five years, compared to an average of 29% in the overall UK property market.
Farmland values
Growth in UK farmland values is slowing following a period of stellar gains.
Prices of bare agricultural land in England and Wales increased by just over 1% to £8,845/acre in Q2, the slowest rate of growth since Q1 2021, according to the Knight Frank Farmland Index. Annual growth slipped to 8%.
Our index has beaten the FTSE 100, gold, prime central London houses and mainstream house prices over the last three and 12-months. A period of more moderate performance was perhaps to be expected, writes Andrew Shirley. Spiralling interest and inflation rates have also been playing on the minds of prospective buyers, he says.
A rise in the availability of farmland for sale is also contributing. Almost 20% more land had been publicly advertised during Q2 compared with the same period in 2022, according to the Farmers Weekly Land Tracker. Despite the increase in supply, however, there is still not enough land on the market to match regional demand across the country, especially in areas where residential and infrastructure development has led to a number of landowners with rollover funds to spend.
The gulf in performance
London's hotels are showing few signs of the squeeze on consumer spending. The capital's revenue per available room climbed 50% in the first five months of 2023 compared with the same period a year earlier, according to figures from HotStats.
The gulf between hotel trading performance and transactional activity has never been wider as interest rates rise, writes Philippa Goldstein. Hotel transaction volumes reached about £860 million in the first six months of 2023, some 60% below investment volumes for H1-2022.
Specialist hotel-focused investors, both domestic and from overseas, as well as high-net-worth-individuals and family-offices accounted for 70% of transaction volumes. These buyers are generally well capitalised and aren't reliant on funding through debt markets. The next six months should see more robust levels of investment activity, with several hotel deals known to be under offer, though much is going to depend on how much further the Bank of England will tighten monetary policy.
"HNWI and family offices are certainly becoming more active in the sector and with the increasing cost of debt finance they can outbid other types of buyers," says Henry Jackson, Head of Hotel Agency, and Partner at Knight Frank. "Where assets have been operating exceptionally well, we are seeing competitively priced assets attract multiple strong offers, proof that capital is readily available where investors can see value.”
This week in inflation
The headline rate of inflation in the US fell to 3% during the year to June, down sharply from a peak of more than 9% in June 2022, according to official figures released last week. Core inflation rose at an annualised rate of less than 2% during the month.
Fed officials have been cautious to avoid declaring any sort of victory. As Matthew Klein has noted, there are reasons to think that the headline numbers are being distorted downwards by the same sorts of temporary factors that made inflation look worse when prices were rising at double-digit annualized rates.
Nevertheless, the figures are encouraging and investors have increased bets that a widely anticipated quarter-percentage-point increase at the July 25-26 meeting will be the last of this cycle.
Could the UK follow suit? We'll know more on Wednesday morning when the next Consumer Prices Index is published. Economists polled by Reuters forecast a drop to 8.2% in June, down from 8.7% in the previous month.
In other news...
Rishi Sunak considers scrapping inheritance tax (Bloomberg), wealthy collectors seem undeterred by global turmoil (FT), interest rate rises drive biggest postwar fall in UK household wealth (FT), asking prices for UK homes slip as Bank of England's rates rises bite (Reuters), and finally, CFOs turn wary as inflation and borrowing costs bite (Reuters).