According to property experts Property Rescue, confidence in commercial property in the UK is worse than it has been for a decade.
Back in December 2015, industry experts were claiming that the commercial property market had peaked and that there was no reason that it couldn’t stay high.
In fact, that same month, the Financial Times referred to a “wall of capital” that foreign investors were itching to invest in this country.
Yet a sudden lack of faith among developers comes despite a bounce-back in growth from 4.5 per cent in December 2015, to 8.4 per cent in January.
This has manifested itself in a lack of new planning applications, which of course point to developer hesitance. So what has caused this drop in confidence? Let’s take a closer look…
Brexit referendum
With the threat of Britain leaving the EU, investors (both at home and abroad) are uncertain of the effect such an exit will have on the economy.
As a result, many of them are unwilling invest in commercial property until things become clearer after the referendum takes place on the June 23.
Prime Minister David Cameron and other politicians supporting the Remain and Better Together campaigns predict that a vote to leave would cause property prices to fall and damage the economy as a whole.
While this may be bad for developers and investors in the commercial property market, prospective buyers in the residential market may like what they hear. It may even be a contributing factor for them to vote leave.
After all, the UK – particularly London – does have one of the most overvalued property markets in the world.
Meanwhile, those campaigning for the UK to leave the EU say any such threat is overblown and that the British economy can thrive on its own.
But whatever the facts, investment in such uncertain times is a risk some developers are understandably unwilling to take.
In fact many are now adding referendum clauses, meaning that should Britain find itself no longer a part of the EU on June the 24, they can legally pull out of any binding deals.
Global economic slow down
The UK economy is getting stronger – albeit extremely slowly. Wages are rising, and employment is in decline. Despite this, a number of external issues are still a threat. Chief among these is the recent economic slowdown in China.
Falling oil prices also had an adverse on British companies and the overseas economies with which they do business.
The recent turmoil in the Ukraine, Iraq and Syria, in addition to stagnation in the Eurozone has also contributed to this lack of confidence and attractiveness in the UK property market as a whole.
Time will have to tell, but the commercial property market will certainly not make any drastic improvements until after June 24.
