When considering what to write for this update I decided to look back upon some thoughts I had previously put to paper and in doing so recalled an article which I wrote in October 2014 entitled ‘Green Shoots or Autumn Leaves?’ (see the articles section on our website for the original publication).
Basically, my article focussed on the state of the commercial and domestic property markets at that time and essentially posed the questions ‘where are we now?’ and ‘where are we headed?’.
I thought it might be an interesting notion to revisit the position as at October 2014 and bring things up to date, particularly as since then we have of course as a nation undertaken the vote to Brexit, have become more familiar with the concept of the ‘Northern Powerhouse’ and have been introduced to HS2, all of which I think it is not overly controversial to say have divided opinion across the board as to where we are heading and, ultimately, where we will end up as a nation driven by the construction sector and the financial services industry.
So, diving in.
Firstly, domestic property, including the buy-to-let market: in 2014, I put forward the view that the market at that time appeared to have taken a significant step forward, in terms of the numbers of sales and purchases being undertaken. I also commented upon the state of the lending market and concluded the general consensus seemed to be that the enhanced application process which was being introduced back then had not had a significantly negative impact upon the numbers of successful offers to lend being processed.
Since then, it is fair to say that the market has demonstrated significant resilience to world factors and growth (certainly in the regions) appears to continue apace (contrary perhaps to what we are told in the press). Whenever I speak to anyone working within this sector, confidence abounds. However, are things about to change? The honest answer is – who can say for certain? Typical, I know, for a lawyer to sit on the fence, but over the last few years markets (and indeed world events, such as political elections!) have become so difficult to predict that it seems best to approach matters with a cautious optimism. In 2014, I talked about an ‘upward curve’ being experienced in the buy-to-let market; I do think that it would be a fair assessment to say that since that time, due in part to the new Stamp Duty Land Tax rules which came in to force on 1 April 2016, that the residential buy-to-let market has over the last year or so demonstrated a downward trend, and so affecting accordingly that same curve which I noted in 2014. So, is the curve looking like levelling out any time soon? Again, to place myself firmly on the fence (or at least half way across the stile) – only time will tell, but certainly in this writer’s opinion all the signs are there that, with confidence growing in the market, continued growth will hopefully prevail once more.
So, turning to commercial property: this is of course a notoriously difficult market to predict, even more to analyse, in terms of comparable trends and where we are headed. However, my position in 2014 was that, generally speaking, lender-funded purchases were rare and that many commercial investors and operating businesses looking to take on new commercial premises at that time were nervous about committing to commercial lending obligations in an unpredictable market. Indeed, we have seen that where business were doing well, albeit under stress, and where cash profit was being generated, the sensible position was to preserve cash reserves and not commit to anything risky or long-term. This included both borrowing to purchase and entering in to lengthy (and potentially onerous) lease agreements.
I concluded that there had been some encouraging signs of resurgence in the commercial property market in the region, evident mostly in the commercial lettings arena but also to a lesser extent in the sales markets, albeit that this appeared to be focussed mainly around commercial development sites where owners were willing to sell for reduced yields on the basis of quick turnarounds on transactions.
And what of today? Well, since I put pen to paper in 2014 we have as a nation experienced many changes, driven by the ever-shifting global and domestic political landscape and relationships between nations across the world, not just within Europe. As at the date of writing, negotiations between the European Union and the UK are looking tense at best, with (so we are told) little progress being made on either side to progress the Brexit process. However, this commentator’s view is that there is still much light at the end of tunnel to look forward to; history has taught us that we are a resilient nation full to the brim with talented, enterprising people and we (and our Government) must not forget this.
As a practitioner operating in the commercial and property markets, I do feel keenly optimistic about the future. Of course, there are going to be up’s and down’s and no doubt there will be more difficult times ahead. However, property markets are currently looking robust and, if we are to rely upon our nation’s more recent history, these markets tend to fuel and form the backbone of our country’s economy. Long may it last!