PROPERTY MARKET REVIEW JANUARY 2017
SERVICED OFFICES MARKET RECOVERS
2017 has ushered in a recovery in the serviced offices sector, following the initial uncertainty in the wake of the Brexit vote.
Given the weakness of sterling, international investors in particular have been attracted to the sector, as businesses turn to more flexible workplace solutions.
Young, agile start-up tech companies, for example, are reluctant to commit to medium to long-term leases, as a result of their sometimes precarious financial positions. They have therefore found that the serviced office space is appealing in the shorter-term.
POSITIVE FUNDAMENTALS EXPECTED TO REMAIN IN EUROPEAN COMMERCIAL PROPERTY
According to a report from Fidelity International, commercial property values across mainland Europe have been increasing over the past few years, especially in Germany. This trend is anticipated to continue into 2017 as attractive exchange rates versus the euro look set to encourage cross-regional investors to Europe from North America, Asia and the Middle-East.
European Central Bank’s quantitative easing programmes continue to encourage a transfer of capital from the peripher y to the core Eurozone. Neil Cable, Fidelity International’s Head of european real estate comments: “Real estate fundamentals are expected to remain positive, and while QE is in place, we believe the weight of capital will extend the european, excluding the UK, investment cycle. We expect capital growth from yield compression in core eurozone to continue, albeit at a slower pace, with prime yields likely to fall to a new accepted threshold of around 3%.”
BUY-TO-LET INVESTORS MAY SWITCH ALLEGIANCE
George Osborne’s tax blitz on buy-to-let landlords may have the affect of discouraging future investment and may encourage more high-end investors to switch their investment horizons away from residential property and lean more towards commercial property and the yields on offer.
The introduction of the stamp duty surcharge and other post-Brexit vote tax changes for buy-to-let property has been a nail in the coffin for £3m plus residential property.
Mark Fielden, property tax partner at Kingston Smith was reported to comment: “Top-end London residentials have fallen through the floor. If a potential investor has the right expertise or advice, commercial property with good tenants might be a profitable place for 2017 property investment.”
Added to this potential exodus of investors, any non-domiciled residential property owners based outside the UK will be liable for an inheritance tax charge from April, when they own UK residential property through non-UK companies or trusts.
It is important to take professional advice before making any decision relating to your personal finances. Information within this document is based on our current understanding and can be subject to change without notice and the accuracy and completeness of the information cannot be guaranteed. It does not provide individual tailored investment advice and is for guidance only. Some rules may vary in different parts of the UK.