Predicting real estate movements for the year ahead

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Predicting real estate movements for the year ahead


With 2015 well under way this may be a good time to look back on 2014 and consider how predictions for this year are progressing. 
For asb’s real estate team, 2014 closed on a high with over £50m of deals exchanged or completed during December alone, and a strong pipeline of new transactions running into 2015.
So, after a promising start, what external factors will play a part in how 2015 plays out?
Political change
The big question this year is what shape and colour(s) the UK government will be post-May. Commentators are predicting the most likely result will be a coalition government (rather than one team winning an overall majority), which may suit the property sector well, with the worst excesses of policy kerbed as political enemies are forced to become allies and work on common ground.
While uncertainty around the election may result in a slightly softer foot on the pedal in the next couple of months, we don’t see a great deal changing. Concerns over housing supply (particularly in the south east) continue to be a political hot potato and any withdrawal of the shot in the arm called "Help to Buy" will need to be carefully managed. Finally, deflation is now a bigger worry for the Monetary Policy Committee than inflation and any increase in the historically low base rate is likely to be later and slower than predicted even 6 months ago.
Eurozone QE can only increase the search for investment returns that has helped fuel increased capital values over the last 18 months and, in reality, occupier demand in a recovering economy (linked to very little new development during the recession) should mean vacancy rates for good stock stay low and rental values go up.      
Leaving the EU 
That leaves the possibility of an EU exit as the only serious fly in the ointment. Suggestions that a UK exit would simply result in us becoming another Norway or Switzerland is like comparing standing on a train at 70mph to standing on the ground: failing to recognise the potential consequences of a sudden move from one situation to the other is clearly dangerous. For me, this makes the question of whether there will be a commitment to a yes/no vote probably the most serious issue facing the property market during 2015.

Jonathan Cavell, Head of Real Estate (Partner, Property Services)


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Published: 12 Feb 2015

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