Despite the certainty given by the General Election result, ambiguity over the UK’s relationship with the EU will remain in the immediate future and the country’s property markets will continue to contend with a wide variety of old and new structural, economic and legislative changes throughout 2020 and beyond, said Savills as it unveiled its 2020 UK and South West property outlook.
Savills' South West cross-sector outlook event took place last week to over 80 property professionals at the Royal Albert Memorial Museum in Exeter. Representatives of Savills' commercial, rural and residential research teams gave their forecasts for the coming year, the likely investment trends and disruptors in their sectors, and their top picks for property investments likely to out-perform the market in 2020 and beyond.
Despite questions remaining over the UK’s ongoing relationship with the EU, higher commercial property investment volumes are expected across the country this year, Savills said, particularly in the office and logistics markets, as a number of non-domestic institutional investors that were deterred by Brexit uncertainty re-enter the market. There is also likely to be a rise in opportunistic investor activity in the retail sector, as some buyers now see some assets as competitively priced.
Looking at the local commercial markets, Chris Potts, head of Savills Cardiff office, said:
“Cardiff continues to attract a wide group of fast-growing tech and financial companies and, with office investment volumes also remaining healthy, we’re anticipating a positive year for the city’s commercial markets overall. Further afield, we’re also anticipating more investment into the region’s warehouses sector this year, particularly in South Wales where a new National Planning Framework and local authorities putting in place strategies for new industrial development should result in developers delivering more large-scale schemes, which are likely to be quickly snapped up by tenants.”
Paddy Hales, head of Savills Bristol office, added:
“Over the last 12 months, Bristol has continued to cement its position as a leading regional UK city that has appealed to a wide range of occupiers, from local independent businesses to national and international corporate firms, as well as domestic and global investors. The thriving city centre has also attracted a host of new leisure and fitness operators, which reinforces Bristol’s USP of providing an attractive place to balance work and home life. All this, combined with an impressive talent pool from our world renowned universities, places us in an incredibly good position to attract further inward investment that will support further growth and development.”
In terms of the mainstream residential market, Savills anticipates Brexit uncertainty will act as a drag on the market over the short term, but expects prices to rise broadly in line with household incomes thereafter.
In the South West, where the average house price is currently £256,000, the firm forecasts house price growth of 13.1% over the next five years. In Wales, where prices average £165,000, there is greater capacity for growth. Here, Savills is forecasting a strong performance of 18.1% between 2020 and 2024.
Richard Brooks, head of Savills residential division for the South West, said:
“The outlook for the residential market in the South West is positive. While we’re not anticipating a spike in house price inflation, we are seeing a high level of buyer demand and a renewed appetite from investors, which we expect to build over the next 12 months. The clarity stemming from the general election result should bring a greater sense of urgency to the market, allowing movement both up and down the housing ladder.”
Daniel Rees, head of Savills residential team in Cardiff, commented:
“House price growth in Wales has been outperforming the UK average for some time and we expect this to continue in 2020 and beyond. Since the start of this year we have seen an uplift in positive sentiment among buyers and sellers, which, teamed with favourably low borrowing costs and the final phases of a fully-fledged Help To Buy scheme, sets the scene for an encouraging year in the residential market.”