Partner Article

Property investment opportunities remain despite negativity say DTZ

Falling UK debt levels have confirmed that the UK has a bigger debt problem than most other European countries, but it is also ahead of others in working through its legacy debt issues.

DTZ, part of UGL services presented this finding in its Money into Property report 2012 UK, which also revealed that UK invested stock shrank 1% to £537 billion, while other major markets on the continent and elsewhere grew.

In the UK, the equity component, which is smaller, rose by 4% but this growth was not sufficient to outweigh a 4% decline in the larger debt component of invested stock. This fall in debt marks the UK out from most other major markets in Europe, as banks continued to reduce their lending books.

Investment activity in the UK fell back 10% in 2011, primarily due to a lack of debt availability and a mismatch in pricing expectations between vendors and potential buyers.

Richard Turner, Senior Director at DTZ in Newcastle comments: “The situation in the North East broadly reflects the UK wide scenario with a marked reduction in transaction activity since November last year as the banks continue to de-leverage and become increasingly selective about the opportunities they will lend against, whilst investor confidence suffers under the burden of double dips and Eurozone turmoil.

Analysts at DTZ have also witnessed a polarisation between stock which is deemed prime, the definition of which has narrowed and that which is now.

He continued: “In particular, prime investments that are of interest to the institutions continue to attract very competitive bidding as well as smaller lots that are within range of the private investor market.

“This leaves a significant proportion of property that is ‘unfinanceable’ and only within range of those cash buyers who are willing to invest in circumstances where very attractive returns are on offer.

“Much of this stock is in negative equity and until banks force an exit is untradeable.”

This return to value within UK property sector is demonstrated by the latest DTZ Fair Value Index which now shows all 20 UK markets within the “hot” or “warm” category. DTZ’s view is that the negative sentiment towards the secondary and tertiary sectors is now overdone and as such those investors with cash who are willing to take on some risk, are now able to pick up some great value opportunities.

He added: “In contrast to the investment activity we are witnessing an improvement in the number of occupational enquiries for the remaining vacant buildings which, coupled with a gradual take-up of existing development stock. The wider economic picture however gives plenty of opportunity for downside risk in occupational markets.”

This was posted in Bdaily's Members' News section by Ruth Mitchell .