I recently attended a seminar which, whilst being very London centric, did look at the prospects for the whole of the UK property investment market and the results were surprisingly optimistic.
The economic element did actually portray the UK as doing quite well against the Eurozone but uncertainty, notably around Brexit, was leading to a lack of fixed investment which will have a further impact on productivity, both in the near and medium term.
What became patently clear was that London was in a league of its own on just about every measure but that the West Midlands was in the next level but someway behind in terms of job creation and GDP growth. Alongside us were the South East and East of England.
Whilst many seasoned campaigners will consider that property pricing is high, it was considered by the panel from a number of different aspects that it was still quite attractive.
Prime assets are probably overpriced, but then that is a reaction against taking on undue risk and there is still an attractive risk premium when set against Corporate Bond yields.
The exceptions to this are retail in terms of shopping centres, high street retail and indeed retail warehousing. Indeed, the Fund pricing, either in terms of specialist Funds or those long term Funds with heavy exposure to retail, are already being priced down.
The comment on the leasing markets was that these are strong, again with the exception of retail and that there had been a strong transactional market in investments throughout 2018, albeit these figures may include certain infrastructure projects which may unbalance matters and indeed, London was a very high percentage of the total. This is not surprising as overseas investment is driving transactional activity due in a large part, in the opinion of the panel, to the transparency of the market.
London is the largest recipient of trans-border activity. This is likely to continue if allocations of major international investment Funds towards property are increased from nine per cent to ten per cent as is being suggested with at least 59 of the top 100 of such Funds having below ten per cent exposure at the moment. This could release a potential buying power of $800 billion, a substantial portion of which could find its way to the UK.
The alternative market witnessed by Alternative REITS had outperformed and whilst there were heavy allocations of money towards PRS, there was an underspend in this sector as these institutions are seeking new product, invariably by way of funding.
In essence, the predictions for 2019 were beds, sheds and indeed debt together with City Centre development.