Trends in the Commercial & Residential property markets:
- August 15, 2018
House Prices in the UK are still rising, according to the latest Halifax housing survey. It is reported that house prices increased by 0.8% Month on Month in September! Whilst this is below the 1.5% rise in August it is beyond market expectations and probably reflects a continuing shortage of properties for sale and the growth in full-time employment. Furthermore, year on year house prices rose 4% in the 3 months to September, from a 2.6% gain in previous period. This is the biggest rise in house prices in 7 months but below the peak of 10% recorded in March 2016.
This UK trend hides some disparities between regions. In particular, London prices appear to be actually shrinking whilst much of the rest of the country continues to see increases. One might worry that the increasing pressure on spending power arising from recent inflation and continuing affordability concerns might dampen buyer demand. Moreover, the pattern over many years has been for the rest of the UK to gradually experience similar trends to those which start in London – the “ripple out” effect. So, it is a continuing question as to if and when we might start to see some levelling off of values over the coming months. None of this seems to trouble the Residential Development sector, however. The continued growth in values (ex. London), a perceived shortage of stock, fiscal and other encouragement by the authorities and better supply of project finance has encouraged existing builders plus many others new to this sector.
The current UK development hotspots are said to be Manchester, Birmingham, Bristol and London, as investors move in to meet the high demand for housing in these areas. A flood of international capital is said to have contributed to the high level of residential development activity, a large part of this being the weakness of sterling. At Key, we have seen examples of Chinese investors looking to fund substantial schemes, take a share of the profit and remove the need for debt funding.
Activity in the Commercial Property market has also been strong for quite some time, driven by a combination of domestic investors and their international counterparts being attracted by the weaker pound. London remains very active as always and student accommodation is the favourite choice for many commercial property investors, with schemes cropping up in many university towns and cities. Some domestic buy to let investors, being hampered by increasing tax burdens on residential investment, have also turned their attention to commercial stock. We have therefore seen some firming of values and reduction in yields on commercial property as a result.
Here at Key Commercial Finance Solutions we continuously monitor the market place in order to keep updated with the current trends and lenders in the market, in order to assist our clients with the best funding options available. Please call the team today if you would like more information or to alternatively arrange a meeting.