A benign global economic environment, supported by a European recovery, though the UK is starting to fall behind.
Subdued consumer spending and business investment arising from a weak currency, inflation and Brexit uncertainty.
Risks of an overshoot in US interest rates could dampen UK growth in 2019 or 2020, though increasing clarity over Brexit will help the UK bounce back.
Rebounding strongly from the uncertainty in the immediate aftermath of the EU referendum, the UK property investment market has seen a surprise surge in transaction volumes, particularly from overseas investors. Investment volumes are likely to remain robust at around £60bn for 2018 as a whole.
We expect substantial political noise and turbulence arising from Brexit issues throughout 2018.
Although agreement on Brexit withdrawal issues has taken time to secure, these issues are not likely to have significant impact on real estate. But attention will now progress to the much more important question of future trade and migration arrangements.
EU trade access is likely to be worse than the UK has now (perhaps somewhere between the Canadian and Swiss deals with the EU), though only to the extent that migration controls are tighter than they are now.
Our sectoral picks include industrial and logistics property, especially in urban areas and the so-called ‘beds sectors’ (residential, student accommodation, hotels and healthcare).These sectors either exhibit non-cyclical characteristics, have very significant demand and supply mismatches, or (in the case of hotels) will benefit disproportionately from the weaker pound.
Please feel free to contact us if you would like to discuss any aspect of the report.