The latest UK real estate market outlook published by M&G Real Estate, one of the UK‘s largest property investors, shows the UK property sector is well positioned to weather uncertainty arising in 2017 as the Brexit agreement unfolds, Trump takes office and general election campaigns get underway in France, Germany and The Netherlands.
The outlook predicts market turbulence will continue to gradually subside as occupier demand remains resilient, capital values are tentatively rising and the UK market remains particularly attractive to overseas investors as a result of weaker sterling.
The industrial sector will remain upbeat as it continues to benefit from e-commerce driven structural change, maintaining the demand and supply imbalance and creating strong rental growth in the short term. This unwavering demand will present opportunities for investors and developers looking to meet demand, particularly around the established hubs in the south east and around the M25.
However, it is expected there will be a slight weakening of the central London real estate market. Changes to Stamp Duty Land Tax introduced at the start of last year are influencing central London residential while central London office take up is likely to be affected by businesses more likely to be impacted by Brexit. However, with GDP moderately positive at 0.5%, general growth should underpin the demand for space.
M&G Real Estate also points to a ‘keep calm and carry on’ mantra in the investor market. Stability has returned to capital values which are showing moderate growth and property yields performing well above Government bonds.
In addition, more defensive sectors – such as private rented residential and long lease property such as supermarkets – will continue to hold up, offering attractive income streams for pension funds and other institutional investors.
Richard Gwilliam, Head of Property Research, M&G Real Estate, comments: “The UK property market appears to be in a much better position than we were expecting in the summer. We now look to be entering 2017 from a position of relative strength and with a modicum of optimism. However, it is clear that there are definite and significant headwinds in place that may affect the market over the next two years.”
The UK property market appears to be in a much better position than we were expecting in the summer. We now look to be entering 2017 from a position of relative strength and with a modicum of optimism. However, it is clear that there are definite and significant headwinds in place that may affect the market over the next two years.
Richard Gwilliam,
Head of Property Research