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UK real estate to rebound by 2024 – Savills

  • The U.K real estate could rebound over the next half a decade
  • According to Savills, the average UK property prices are expected to jump by 15.3%
  • Savills warns that the growth will be slower due to higher taxes and rising interest rates

The UK real estate could be headed for a major bounce back in the next five years, after months of plummeting prices. The crisis, which has now lasted across the country for several quarters, could not-so-long from now come to an end, this is according to a Wednesday report by Savills.

Savills is a brokerage and real estate adviser based in London and its recent report predicts a 15.3% price jump for existing UK homes between the year 2020 and 2024. The report further states that the growth may not be uniform across all regions; the North-West is likely to lead with a 24% growth, while the East and South-East may experience an average growth of 11%.

“We anticipate a continuation of trends seen historically, where London and the South East underperform markets in the Midlands and North,” the head of residential research for Savills, Mr. Lucian Cook stated in the report. “This stage of the cycle appears to have begun in 2016, coinciding with the referendum, when London hit up against the limits of affordability.

The Savills’ report, however, noted that London’s luxury market would undergo a significant upswing; prime central London could rise by 20.5% on average, starting with an increase of 3% within the next year.

“Historically, a recovery in the prime markets has been sparked in prime central London, when the city’s most expensive properties start to look [like a] good value on a world stage,” Mr. Cook said in the report. “Values have been bottoming out over the past year, resulting in a build-up of new buyer registrations over recent months. Both signal that the market is set for a bounce, but this is being held up by uncertainty.”

In areas outside London, prime property prices could rise by about 14.2% by 2024 while luxury homes outside central London are expected to increase by 11.5%, the report indicated.

Scotland could experience a 20% jump in prime property prices, with units in North of England and Midlands expected to hike by 20.5%.

Rental rates are also set to rise within the next five years; in London, renters can expect a spike of about 18.8% even as annual transactions are expected to remain almost constant at 1.2 million.

But Cook warned that the growth could be slower than in the previous periods due to increased taxes and interest rates.

By Damian Wood

Source: Invezz

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Investing in commercial property: beware the Brexit clause?

Last month saw an apocalyptic picture painted about the impact of Brexit. The Bank of England warned that commercial property values could fall 48% in the event of a No-deal – worse than the global financial crisis – and even a more “orderly” Brexit could see a 27% drop.

The severity of the warning seemingly took many by surprise. However, the negotiations and the resulting wider economic uncertainty have been impacting commercial property valuations and tenant demand for some time.

‘Brexit clauses’ have become a feature of commercial property valuations since the Referendum, stipulating that values can’t be guaranteed following the March deadline. But while previously, these clauses were typically buried in the “boilerplate” wording, now they’re front and centre, presenting a much bigger obstacle for institutional investors. Funds are increasingly sitting on their hands, with some suspending or aborting live deals, reluctant to gamble stakeholders’ money in a market with such a blind spot.

Silver linings, not Brexit blues

But this isn’t Armageddon. One person’s risk is another’s opportunity and the vacuum left by institutional investors has left the door open for cash-rich private or family office investors. With no institutional shareholders and often no short-term debt pressures to satisfy, they can take a longer-term view. They’re actively looking to price and pursue risk, especially (soon to be) vacant properties and will remain a force to be reckoned with in this period of Brexit limbo.

A simple reading of the Central Bank’s numbers also ignores the fundamentals underpinning UK real estate. The headlines might say differently, but our major cities continue to be buoyed by overseas capital. Over three-quarters of the £5.3bn spent on Central London office transactions in Q2 this year came from foreign buyers.

So before everyone pours freezing cold water on the market, we should remember that Sterling’s devaluation has ensured that UK real estate remains attractive. And, with investors now getting more bang for their buck, we’re arguably more appealing than other territories. Compared to many other competitor markets we have more transparent, real-time data available, alongside a mature professional infrastructure and easy access to finance to aid investment decisions.

There’s also the intangible: certain investors will always want to be in the UK and feel a sense of inherent security investing here. It may not feel like it now, but historically we are far more politically stable than many other countries and have a well-established rule of law. Depending on where you sit, these are key factors for investors’ wish lists.

Yes, Brexit presents significant challenges. It would be foolish to pretend otherwise. But it doesn’t have to be a perennial spectre. Some might argue that the uncertainty generated by a potential change of government at Westminster because of Brexit – rather than Brexit per se – is a bigger concern and would have a more significant impact on investment decisions. With continued resignations and reshufflings, no one can say for certain what will happen politically.

When the dust settles however, just as after every major disruption to the sector in the past 30 years, we’re likely to find that a number of risk-savvy, cash-rich operators have done well from the uncertainty and will be well-positioned for whatever the post-Brexit World throws at us.

Source: Property Week

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Pound falls to 20-month low – time for UK property investors to act?

Following the postponement of a crucial Brexit deal vote by the UK government, the pound has fallen close to its lowest value against the US dollar since April 2017 – and this creates a significant opportunity for international investors to buy UK real estate.

What’s happened?

On Monday 10th December, UK Prime Minister Theresa May cancelled a key vote in the House of Commons on the details of a Brexit deal, outlining the current terms of the country’s withdrawal from the European Union (EU).

The decision was taken after Mrs May admitted that the current deal on offer, one negotiated between her cabinet and EU leaders, “would be rejected by a significant margin” by MPs in Westminster. It means that she must now decide the best of course of action to take, with the UK scheduled to formally leave the EU on March 30th 2019.

Following this decision to postpone the vote, the pound fell to its lowest level against the US dollar for 20 months:

  • After markets closed, sterling was down almost two cents against the greenback, with the exchange rate hitting £1/$1.2562, close to its lowest level since April 2017
  • At £1/€1.059, the pound also fell 1% against the euro and reached its lowest rate since August 2018

What do international investors need to know?

Firstly, it’s important to consider the fundamental reasons for investing in real estate:

  • Long-term growth
  • A regular income from rental returns
  • Decisions based on supply and demand levels in key markets

Then, international investors looking at the UK property market should also remember:

  • Ongoing Brexit discussions does not change the fact that UK property is one of the strongest investments one can make globally
  • 340,000 new homes are needed each year until 2031 just to meet current demand
  • Demand for rental property will reach six million by 2025 – but just 100,000 purpose-built rental properties are currently in the delivery pipeline nationwide
  • Until this shortfall is addressed, property demand will remain extremely high in a sector of low supply

An immediate opportunity to buy UK property

With the pound experiencing a significant degree of volatility, it presents an unmissable opportunity for international investors to buy UK property now.

At Select Property Group, we’ve seen a number of investors in recent years use fluctuations in exchange rates to buy multiple properties, taking advantage of greater levels of affordability.

Strategically choosing to invest and enter the market now means investors give themselves the best opportunity to achieve higher returns in the long-term.

Source: Select Property