UK property outlook

The property market is being tipped to lead the UK, and other economies. A decade ago we witnessed the UK property market emerging from a recession and a new vehicle, the Limited Partnership, being increasingly used in property transactions.

A decade later, in a year when it is widely predicted that the recovery in the occupational markets will commence, we are also set to witness the first moves towards the introduction of a Real Estate Investment style vehicle into the UK property market.The revival of the economy, and the recovery in the occupational letting market, has been accompanied by a sharp rise in the cost of borrowing on the swaps market.We expect that the lending market will remain buoyant in 2004, and a continuing tight market for lending opportunities maintaining a ceiling on any pricing increases.

A liquid market, a high degree of information flow, the bond/equity type nature of the traditional UK lease with its lengthy term and upwards only rent reviews, are making a difference. More recently, investors have been attracted by the prospects of returning rental growth and relatively attractive yields on UK. The increase in activity levels has mainly been due to the availability of potential investments in less saturated areas around the UK.

The Buy to Let market, one of the great success stories of the last ten years, has produced a growing band of happy investors buoyed up by the delights of solid capital growth and respectable rental incomes. It is, however, a cyclical market and one as subject to the laws of supply and demand as any other sector of the economy.

Investment in the UK remains very solid and will continue as a popular option for a diverse cross-section of the population.

The general mistrust in institutions, confusion over the pension, tax systems and falling equity markets has led popular opinion towards investing in properties in the UK. More and more people are turning to property due to failure of high expected returns in other sectors.

There is a solid long term opportunity to make profitable returns in property investment. Huge population growth, sluggish government housing policy, and interest rates will influence the property purchasing process as well as increase the need and number of buy to let properties in the coming decade.

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