Predictions for the UK Property Market in 2018

London Skyline

2017 was an unusual year both in the UK and overseas, showing increased uncertainty in the UK property market. BREXIT has been hugely responsible for this uncertainty within the UK and there have been signs that the number of deals decreased towards the end of 2017 as investors became increasingly cautious. It looks like this may continue into 2018 as negotiations in Europe and other national and global political decisions remain completely unpredictable. So how could this affect the UK property market in the next 12 months?

Although companies are being more cautious the office market, especially in Central London, is expected to remain relatively active. This is primarily due to a significant lack of available office units on the market. In London’s West End much of the development, over the last couple of years, has been the conversion of office blocks to residential units. This includes projects like Centre Point at Tottenham Court Road creating in excess of 80 luxury flats. In 2017 Davis Brown (being estate agents in Fitzrovia) continued to let offices in Fitzrovia despite concerns that activity may slow as companies were becoming reluctant to move or even move to cheaper locations outside of Central London. This is expected to continue into 2018 as there are a limited number of offices on the market, and rents achieved are likely to remain consistent.

As consumers’ attitudes change increasingly towards purchasing online, along with the worry of increased inflation, it has been predicted that secondary high streets are likely to struggle, whereas main streets with flagship stores are less likely to be affected. Despite this, areas such as Kentish Town Road are becoming more popular locations. New leases have just been agreed with increasingly upmarket brands and this will attract further retailers and likely result in overall rental increases in the area.

This continuing change in shopping behaviour has increased the requirement for industrial warehouses and distribution centres. Over the last few years demand for industrial units has increased leading to rental increase and continued development, so likely to remain an attractive investment to many investors.

The residential property market struggled in 2017 due to a change in Stamp Duty – particularly in Central London and on second homes. The severe lack of housing still means there continues to be a rise in rents and increase in sale prices in highly populated areas. Incentives made by the government to assist first-time buyers have not been sufficient for many people to be able to buy a home, especially in London. This has resulted in many unable to get out of renting a property, putting increased demand on the rental sector. The RICS have recently predicted that an additional 1.8 million rental homes will need to be built by 2025!

Despite certain markets appearing to remain strong the level of uncertainty is likely to remain high for many investors, so as a result will be focusing on more risk adverse assets. Properties occupied by tenants with strong covenants for lease terms in excess of 15 years similar to the Nuffield Centre in Newbury, currently on the market with Davis Brown, are likely to appeal more to investors as the rental income is guaranteed.

We can only wait and see what happens to the UK property market over the next 12 months; however it may not be as bad as many scare-mongers believe. As the pound still remains low it is likely that many overseas investors will continue to invest.


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