Whether you are “in” or “out” we are all affected by the upcoming referendum on our future in the European Union and the impact on the local property market in our area.
Despite a promising start, investment in UK commercial property eased back during the first quarter of 2016. The latest news reveals that investment totaled £11.7 billion during the first quarter of the year, which is 27% down on the previous quarter although 7% above the long-term average.
Notably, however, January accounted for half of total of the first quarter’s volume, with activity tapering off significantly in the following two months. UK-based institutional investors were among those scaling back on activity, purchasing £2.9 billion of commercial real estate in Q1 2016, the lowest quarterly total for almost three years. However appetite remains strong for regional property assets, with £4.5 billion invested outside of London during the quarter – 6% above the five-year average. Conversely, investment in the capital was 15% down on the five-year average, driven by a reduction in purchases by overseas buyers.
Average national transaction yields continued to move in during the quarter, reaching 5.49%, suggesting that pricing has thus far not been affected by investor caution.
The next couple of months are likely to remain quieter and I expect to see a reduction in investment volumes in the second quarter of year. This creates opportunities for those who know where to look, and investors who can mitigate the uncertainty with strong insight are in a strong position to benefit.
Brexit concerns aside, the market remains in a fundamentally strong position and we don’t see any reason why activity won’t bounce back if the country elects to remain part of the EU on 23 June.
If Britain were to leave the EU, there would be continued uncertainty as negotiations would need to take place to rebuild trade agreements and Britain’s position – something that sceptics believe would cause added delays and pressure to a potentially fragile economy. However, it’s not impossible, trade links can be re drawn and policies can be re agreed, the property market and economy may not be as heavily affected as we’re being led to believe. The issue is, this is a leap in the dark; we are going into the unknown by leaving the EU as no country has ever done it before. As it stands, there are both positives and negatives to leaving the EU, only after June will we know what the impact will really be to this sector and the rest of the economy.
A poll of UK and global property investors with holdings worth £350bn found that more than two-thirds were pessimistic about the outlook for property values if the leave campaign wins.
The Office for National Statistics (ONS) reported on Tuesday a 2.5% rise in house prices in March, bringing the average cost of a home to £291,820.
However, the latest survey of estate agents by the Royal Institution of Chartered Surveyors (RICS) suggests that the mood has altered – partly as a result of the stamp duty changes that took effect in April and prompted landlords to bring forward purchases, and partly as a result of the forthcoming EU vote – although referendum effects are mostly focused on London.
On the home front in our area we have seen the positive start to the first quarter slow down across the board – is this Brexit or the cluster of Bank holidays and half term or even the hot weather (or the torrential rain outside my window as I write this!) – We don’t know. We are still experiencing good demand for freehold commercial property and the appetite for good development land has not abated.
We shall have to wait and see what the result brings but this commercial property surveyor does not believe all the gloom and doom and that the property market wont’ fall of the cliff – but interesting times ahead and more important than ever to keep a close eye on your property assets and take some friendly non-committal advice from qualified professionals.