BREXIT, COVID and the Commercial Investment Market 2021

After a turbulent year filled with uncertainty and monumental changes to all categories of businesses, at last we have some positive news as a vaccine for the Corona virus is set to released. Yet, it is likely to be 12 months before the full public confidence has returned and we can continue with our daily lives, without restriction.

Britain’s withdrawal from the European Union has taken a back seat this year, having had many twists and turns from the referendum way back in 2016.

Trade talks look set to go to the wire as the clock ticks closer to the transitional period and the start of Post Brexit Britain, from 1st January 2021. It will undoubtedly reshape the country’s international standing.

The Commerical property market have seen over the last few years that the residential market has tightened but Halifax announced they have seen strongest growth for 16 years, with house prices in November increasing by 7.6%. 

Tom Bill, Head of Research from Knight Frank, suggests that we could see a Brexit bounce at the start of the year if the stamp duty holiday is extended.  He concludes that the vaccine will see a return to life and some normality next spring, with the market picking up again in the second half of 2021.

Rishi Sunak has allocated £5.2bn of government funding for the two-year Help to Buy scheme due to start in April. Under which home buyers are offered an equity loan of 20% to pay for the bulk of a deposit in a new-build, will be given £2.2bn next financial year and £3bn in 2021-22.

With this activity within the residential market, new owner occupies are beginning to get a long overdue foothold in the market. A ‘buy to let investor’ may start to feel more limited returns across their portfolios, as well as the lack of opportunities to acquire other property as competition grows.  

Another area investors typically turn to for growth is the the stock market, which has generated some positive news recently. J D Wetherspoons, up 37%, Easy Jet 88%, The Gym Group 64%, Marks and Spencer’s 60%, Wagamama 83%. With a narrow perspective these increases sound enticing to any investor, however these mark ups are a third lower than they were on 1st January 2020.

Interest rates are becoming weaker and weaker; HSBC has raised fresh fears that it could be about to reduce the interest rate on its regular savings account to a reduced rate of just 1%. Some countries in mainland Europe now having plunged into negative equity. Although secure, it becomes increasingly obvious that tying up capital with a high street bank offers next to no return on your money.

Excess savings of about £100bn built up by UK households during Covid-19 lockdowns are now being spent and could speed up Britain’s economic recovery, according to the Bank of England’s chief economist.

Andy Haldane told the Daily Mail there was “huge pent-up demand”, and that a big spending spree could help the economy bounce back more quickly than forecasters expected.

He said the UK savings ratio, which measures how much of disposal incomes is set aside, rose to 29% between April and June, compared with 6.8% in the same period last year. The ratio is more than twice as high as the previous record of 14.4%, set almost three decades ago.

The unpredictability of stocks and shares, the competitiveness of the residential markets and the poor interest rates mean there’s reduced opportunities to grow capital.

The Industrial investment market remains strong; a good tenant, on a long lease, on a good estate, could offer yields of 6/7% and importantly can be exceedingly secure. Although yields are compressing from a 10% average during the recession, it is still an excellent way for an investor to enhance their returns and if advised correctly, events in the lease could promote further growth.

We would expect property values and rents to remain relatively stable. The summer will be the real test for tenants as they review their financial health, when the government help has ended. Currently it is clear that industrial stock levels have not risen significantly in order to satisfy industrial users looking for alternative or additional premises especially in the North West, where the market for industrial unit of various sizes and been extremely resilient, especially with the growth of eCommerce, and we anticipate that activity will remain strong for the next 6 months with record levels of take up and record rents achieved across the board.

Brexit and COVID have been huge moments in an unforgettable year, it will be interesting to see how the markets perform in 2021.

If you need any professional property advice, please do not hesitate to contact Nolan Redshaw to discuss further.

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