Author: Pete Rose
If the UK’s property investment market was dominated by confusion and chaos for the most part of 2022, we appear to be heading closer towards clarity and consensus in 2023.
The onset of a new year has brought with it the property agency reports and predictions. Savills reported the usually robust central London market hitting historically low volumes in December 2022, while Lambert Smith Hampton highlighted UK investment transactions slumping to 60% below the quarterly trend in the final quarter of last year.
Though the headline stats appear alarming, they do not necessarily indicate a lack of demand but more of a disconnect between buyer and seller expectations. As a decade-long era of low interest rates came to an abrupt halt, the landscape changed rapidly and property valuations came under increased scrutiny.
Put simply, buyers’ reluctance to commit to deals based on prior assumptions collided with sellers’ fears of crystalising a loss at the bottom of the market and contributed to a major slow-down in deal flow.
This appears to have eased a little towards the end of the year. As we head into 2023, most market commentators are cautiously optimistic about the year ahead. There is a collective sense that prices have corrected and an emerging pipeline of deals to support the theory.
Pete Rose, head of UK at Forbury, said:
“In the past year we’ve seen are interest rates all over the place, geopolitical pressures, so risk mitigation has come to the fore. Whether you are doing an external transaction or appraising internally, you need robust appraisal tools at your disposal. This is especially true for a armlet in which everyone across the board is looking at what they want to buy, and what they want to sell. Uncertainty generates activity, but this activity needs to be driven by thorough analysis and evaluation.”
In the past week, global investment manager AEW announced plans to acquire more assets as the market continues to correct following recent interest rate rises. The firm said the UK is an immediate priority as it is proving to be the quickest to reprice, as well as Germany and Spain, followed by France.
They will no doubt be followed by other opportunistic investors, who will provide the catalyst for renewed market activity during the first half of 2023.
As the market continues to recalibrate, valuation methodology will become increasingly important and, now more than ever, will often be the difference between the success or failure of acquisitions and disposals.
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