A brief review of the UK property market from August/September 2015

As fully qualified chartered surveyors, the team at Davis Brown, London takes an avid interest in both the residential and commercial property markets. With September marking the end of the third quarter of the financial year, it is a good time to reflect on the situation. The below is a brief summary of the recent Royal Institution of Chartered Surveyors (RICS) reports on the subject.

Commercial Properties

The trend for demand over-running supply continues across the country, with demand for leasable space growing for the eleventh consecutive month. The continued lack of space relative to demand is set to increase rental prices in the next quarter. As commercial property agents in W1, we note that the gap between supply and demand and ergo the rental increase, is more pronounced in the London area. This is mirrored by 50% of the London surveyors questioned who believe that commercial space is overpriced (a 5% increase on the respondents with the same answer in the prior period).

The retail sector as a national average has grown; however, it remains notably lagging behind the office and industrial sectors. This discrepancy is most notable in the North of the UK.

Investment levels have been growing steadily, as have the number of overseas buyers. When paired with the continued lack of property for sale, the capital values for commercial properties have risen notably in the period. An interesting note on the topic of foreign investment/policy is that 44% of the respondents stated the belief that if Britain opts to leave the European Union in the upcoming referendum, it would have a significantly negative effect on the commercial property market.

Residential Properties

In a similar story to the commercial market the residential market show continued growth in terms of interested new buyers but a lack of new instruction is damaging the rate of sales growth. This is further compounded by the continued (but less pronounced) decline in the number of vendor listings (which have failed to increase significantly since 2013). Again, with demand outstripping supply, house prices are set to rise and as consequence house price inflation will also rise. The RICS suggests that there will be a significant growth in sales across the UK in the next twelve months, but with particular effect in Scotland and Wales.

Again mirroring the commercial property sector, respondents from London gave a 50% view that the prices were fair, in comparison to 68% of respondents from other parts of the country.

In the lettings market the RICS predicts that rental prices (UK average) will increase by 4.5% over the next 5 years. This reflects the increased tenant demand, which is paired with a mild increase in Landlord instructions.

As a macro point the Loan To Value (LTV) values remain relatively settled across the buyer categories (First time, Buy to Let and Existing).

For more information about the property markets in London, why not contact Davis Brown, we are quality driven residential and commercial property agents in London.

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