Year in Review
Almost 12 months ago, in a fit of uncharacteristic bravado, I made some predictions for 2016 and committed it to print. A few days ago, I tentatively revisited them and was pleasantly surprised to find that if my life as an Investment Property Advisor ends, I could take up soothsaying.
(Mind you, if I was horribly wrong about everything, I would have let time and white noise drown that article).
So what were the predictions which make me confident enough to draw your attention to that article:
- Property yields would stagnate
- Purchasers would be more discerning
- Some markets would reach a cyclical peak
- An upward drift in yields for secondary assets with questionable fundamentals.
However, I failed to predict that Brexiters and The Donald would win against all odds, that Leicester City would enjoy an unprecedented triumph or that La May would be leading us after such a truncated period of “…resignation, nomination, selection, coronation…”.
What else happened this year?
- The forthcoming election of metro mayors has become a reality and will prove a further fillip to the late chancellor’s Northern Powerhouse and Midlands Engine strategic ambitions – as will the trend towards Northshoring
- Our housing crisis persists despite the best intentions of the government – the emergence of Hipster Hotspots (from Dalston in London and St Pauls in Bristol, to the Jewellery Quarter in Birmingham and the Baltic Triangle in Liverpool) has done nothing to help the 1.2m people who are languishing on housing waiting lists in England alone
- Although inflation rates have been low, CPI has risen to 1.2% from 0.5% in Q1 2016, with BoE anticipating 2.7% in Q3 2017 – this seems to imply that RPI will reach 4% or above.
So what does it all mean to our sector.
Meeting the 200K new homes a year and our affordable housing targets will continue to be a huge challenge for the industry and the nation, because a new home is still beyond the reach of many first-time buyers - did you know that real house prices leapt by over 150% since 1996, while real earnings have risen by only about 40%.
Fascinating things are happening in the retail sector: the ongoing growth of the ‘click-and-collect’ model, returns and showrooming and expansion of the food & beverage market go hand in hand with convenience and bulky goods retailing. It seems a multi-channel world will breathe new life into physical shops, with the arrival of Amazon GO and evolution of Aldi and Lidl as anchors of retail schemes. The focus on landscape, streetscape and ‘the experience’ will also prove influential.
Will the rise in university costs, the increasing attractiveness of Apprenticeships and the fact that earning money rather than incurring a student debt induce a paradigm change to our student housing market? Add the fall in the attractiveness of our degrees to overseas students in a post Brexit Britain (think visa restrictions) to that mix and suddenly 2015, the most buoyant year for the UK purpose-built student accommodation sector, seems like a distant and forlorn memory.
Ruminating like this makes me feel like Ebenezer Scrooge, so let me leave you with three happy thoughts:
A weak sterling and a strong judiciary system is still attracting overseas investors
Despite the chronic undersupply of and difficulty delivering in housing, institutions still consider the sector a good investment
The rise of the build-to-rent sector is a pragmatic solution to the Generation Rent issue.
Are these the beginnings of my 2017 predictions, or just a valiant attempt to spread good cheer.
Watch this space.