01 Apr 2019
With moderating house prices, house builders are increasingly becoming risk aware and the property development market in the UK is experiencing skepticism where housing shortage, vacant property issue, and land banked sites are making it difficult for the analysts to scrutinize and predict the situation. The serious non-affordability issue can be seen in the larger urban areas, but there are some regions struggling with empty vacant commercial properties, which attracts anti-social elements and poses serious security concerns. At the same time, overseas investment is growing in the country.
In the Eurozone, the price of real estate remains exaggerated and ECB has shown concerns over the increasing prices in the residential real estate markets and the increasing vulnerabilities in these markets. EU citizens are getting worried over the rumors that the new laws could leave EU nationals in a precarious situation. Theresa May assured EU citizens will be allowed to stay, even in condition, when the Brexit happens without a deal and their social security rights will remain unchanged.
Overseas buyers continue to invest in the UK
The report by JLL suggests 18 office investment transactions in the UK’s largest six cities took place in the last year, and 80 percent of the deals involved buyers from overseas, mostly Asians or the ones from the Middle East. The six largest cities are Edinburg, Manchester, Leeds, Glasgow, Birmingham, and Bristol. In Edinburg, 81 percent of the property transactions involved overseas investors, in the year 2018.
Overseas buyers are still attracted in this market where the lack of quality property has been a major problem. Glasgow investment value increased to 1.4 million sq feet, which is more than its five-and ten-year averages. It recorded one of the largest deals with Barclay that acquired 470,000 sq ft.
Brexit fears and EU rights in the UK
After the rejection of a no-deal Brexit, buyers are trying to finalize their property deals, which led to a gain in price in the month of February in some regions. Other reasons for price appreciation have been the lack of attractive stocks. Brexit remains to be a concern where the property owners worry that the value of their properties may decrease in the case of the exit, but the property market experts and HMRC assured the buyers that the market will remain solid, even after the exit, as the key fundamentals are strong.
Another issue is that many buyers believe the mortgage rate is, currently, very low, and it will increase after the deal but advisors say the buyers should not rush into the decision due to the pressure of low rates. The rates are low; nevertheless, the buyers should opt for a fixed rate mortgage to avoid unpredictability. Mortgages are at a historic low, and there is negligible scope for the rates to further descend. In between January to February, the residential sales grew 1.7 percent and non-residential increased 6.7 percent, month-on-month, as per HMRC data. The outcome of the deal is still unsteady, but there are different types of mortgage options available in the market.
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