U.S. apartment market – demand rising to the supply challenge
Multifamily occupancy in the U.S. stands at a 10-year high of 95.8%, gains having averaged 13 basis points a quarter in 2013, maintaining the 2012 pace despite the increasing delivery pipeline. There is a clear trend of recovering secondary Sunbelt markets leading the overall occupancy gains; however, the gateway markets continue to have the tightest conditions, with occupancy at or above 97% in San Diego, New York and San Francisco.
While renter demand is expected to remain strong over the next few years, primarily as a result of the organically expanding base of 'baby boomers' and 'echo boomers', the implications surrounding the very active multifamily development cycle are at the forefront of interest. While there are some supply concerns that will slow the pace of occupancy and rental growth, the anticipated increase in job growth and household formation will help to mitigate the threat of oversupply and keep conditions balanced across the country.
Subdued residential sales and leasing across Asia
Subdued high-end residential sales characterise most major Asian markets, with policy restrictions remaining in place (e.g., HPR in China, extra stamp duties in Singapore and Hong Kong). Meanwhile, China imposed new measures in November in order to slow price increases. Over the next 12 months, sales in the high-end residential segment in Greater China and Singapore are likely to remain broadly similar to levels seen last year; low interest rates should help limit any downside in prices. Residential leasing is expected to be generally in line with trends in the office sector.
UK market accelerates, London continues to lead
UK residential markets finished 2013 on a high, having experienced circa 6% price growth nationally. Much of this growth has come off the back of a significant improvement in consumer sentiment. In addition, government stimulus programmes also contributed to the more positive outlook. Concerns of a price bubble have been overblown, although stimulus packages are already being withdrawn and there have been clear signals from both the government and the Bank of England of a willingness to stem unhelpful acceleration in prices. Housing affordability remains a key concern and will likely feature more prominently in electioneering later in the year. Our forecasts are for national price growth of 5% this year, with London prices expect to lead at circa 8%.
German residential investment market as strong as 2005
In 2013, Germany witnessed one of the strongest residential investment markets of the last 10 years. Two very large transactions took place during the year - the Bavarian housing association GBW was sold for €2.5 billion, and the second largest housing company Deutsche Wohnen AG took over the Berlin based GSW AG for €3.3 billion. The price for portfolios rose from €860 per square metre in 2012 to more than €1,000 in 2013, not only because of the value of the two aforementioned transactions but also due to an increased volume of sold residential developments. €1.6 billion was invested in forward deals in 2013, 90% higher than in 2012. For 2014 we expect above-average transaction volumes due to portfolio realignments, a further increase in forward development deals and market consolidation.
Dubai experiencing broad-based recovery
The Dubai residential market is now experiencing a broad-based recovery, with prices and rents picking up in most locations. Values increased by around 20% in 2013 which has led to fears of another bubble developing. JLL’s view is that the current levels of price increases are unsustainable and that the market will see values increase at a more modest pace in 2014.
Published: 3rd February 2014