Development cost, rental, supply and demand to support home price post Brexit

hamilton international estates Development cost rental supply and demand to support home price post Brexit

06 Nov 2018

Impact of Brexit on EU Economy

A roundtable discussion of AIC managers was held to identify the impact of Brexit, risk factors, and the outlook in the property sector. Commercial mortgages include buildings, factories, apartments, shops, etc. Such buildings require loan for redeveloping and refinance commercial property where loans can be taken as business loans up to £25,000 without any security. In case, one requires more than £25,000, then security will be needed where the administrative and legal costs are also involved.

One can get up to 70 to 75 percent of the value of the property as loan. The amount is also determined by the rental income the property can generate. Property loan for goodwill or involving stocks may get fewer amounts as loan and Mortgage loan.

Commercial property yields

The close -end companies prefer investment in illiquid assets, where the research by Canaccord Genuity claims the yield for an average commercial property is around 5.3 percent, while open-end funds can generate yield not more than 3 percent. Uncertainty related to Brexit has been responsible for distraction in many property and real estate transactions and most investors believe the returns on the property are expected to be robust in the coming years.

Brexit or no-Brexit – Impact of properties

Experts believe the domestic market will remain consistent during Brexit and post Brexit phase, as there exists a strong pressure on the rents. Also the growth in development cost, demand and supply factors are supporting home prices.  There is growing pressure on rents and oversea investors are still looking for fast growth in various regional markets in the UK, because even in the condition of volatility or dip in price, investors will get diversification through it.

2008 to 2018

The property was growing steady after the phase of recession but with the announcement of Brexit, the market underwent a pause in the last two years, and the investment declined to lead to subdued UK housing market activities. Such uncertainties also involved people who were interested in selling the property to get collect cash.

In the commercial property market the selection of right property is the main factor where in some regions in the UK the industrial sector, shopping centers are highly expensive. Also, the regional offices and retail warehouse market yield are giving attractive yields. Growth in any area will be influenced by inflation, long term demand, supply, and long term leases, that it will reduce the impact of the downturn in property prices to prevent turmoil during post Brexit phase.

RICS introduces new policies to support property sale fast

Currently, the market is also dealing with the problem of one of the longest time taken to conclude a sale. RICS, recently, announced a hassle-free survey of the property to the UK home buyers where the current system of three reports that were highly fragmented and confusing will be replaced with simple survey method with levels, where each level will explain about the service. It will involve simple language that the user can understand easily. Improved transparency, no contingency fees, no conflict, and clear advice are the key features in the new policy.

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