The UK property market has experienced repricing which has been seen as positive by wider industry analysts, executives, and commentators. The belief is that an expediently repriced market is better than a false market with out-of-date valuations and low liquidity. The Spring Budget recently announced by UK Chancellor Jeremy Hunt promises “prosperity with a purpose” with a focus on growing the economy via programmes such as investment zones.
Significant commitment from the government to provide support for businesses and investment in local areas looks set to boost the property market in the long term. The Spring Budget was delivered amidst steady increases in interest rates from the Bank of England with the Chancellor acknowledging an expected return to growth in 2024.
The IMF has predicted that inflation is likely to fall to 2.9 per cent by the end of 2023, despite continuing global instability. International factors that continue to vary mean that the UK will not now enter into a technical recession. This, in addition to the fall in wholesale energy prices and tax revenue beyond benchmarked levels, has given the Chancellor leeway to fiscally endeavour for a “Budget for growth.”
The UK’s real estate repricing has been characterised by the MSCI UK Quarterly Property Index recording an 11.9 per cent loss in Q4. Yet executives speaking to PERE (private equity real estate) were positive about this phenomenon. Recent price falls are perceived as a positive for the industry, with an expediently repriced market ostensibly better than a false market with out-of-date valuations and low liquidity.
PERE detected keen excitement from investors, eager to realise the investment potential that accompanies the start of a new cycle. However, the future direction of rates is too great an unknown for most buyers, sellers and allocators to conduct business as usual.
An important announcement was twelve new British investment zones under the “Everywhere” pillar of the Chancellor’s four-pronged Budget. In England, areas selected will benefit from £80m of support, including enhanced capital allowance and structures and buildings allowance rates, relief from stamp duty land tax, business rates and Employer National Insurance Contributions. In some cases, investment zones will also receive access to grant funding to improve local infrastructure.
Measures in the Spring Budget deliver the largest permanent increase in potential GDP the OBR have ever scored in a medium-term forecast as a result of government policy. Over the longer term, the UK’s strong fundamentals and the government’s plan – built on the four pillars of employment, education, enterprise and everywhere – should promote stronger, sustainable growth.