JLL UK has predicted that investment volumes in the United Kingdomm property market in 2018 will total around £55 billion (Bt2.4 trillion), with returns of 6.4 per cent. This is slightly down on the £60bn investment volumes and 10 per cent returns the firm now expects for 2017.
The real estate firm has cited the impact of the removal of the capital gains tax exemption for overseas investors in UK commercial property as a temporary blow to the market, but believes that the new regime will not deter investors in the long term. JLL also predicts that the UK, and London in particular, is likely to be a key destination for Japanese and Korean capital.
Jon Neale, head of UK research, JLL, said: “Undoubtedly there will be investors who are dissuaded by the capital gains tax changes, but the change only aligns the UK with most other developed countries. In spite of this, the major reasons for investing in UK property remain – liquidity, lot sizes, landlord-favourable leases, the strong economic and leasing fundamentals, and at present, relatively high yields and a weak currency.”
“We also expect Korean investors to add weight to the broader push from Asia this year. While they have held back from adding to their UK exposure in the aftermath of the referendum, we expect a return in 2018, attracted by the market’s resilient performance and high pricing in other global markets.”
Finally, amid continued political uncertainty, 2018 will be the year in which many companies finally make decisions about their business strategies post-Brexit, according to JLL. Nevertheless, GDP growth looks set to be around 1.5 per cent in 2018, roughly in line with 2017 and well ahead of some of the more pessimistic forecasts produced at the time of the referendum.
Neale added: “A deal with the European Union, even if it only covers transition, is likely to emerge towards the end of the year, but this means that this will be another year of Brexit uncertainty, with many in property still unable to make informed decisions.
“But in spite of this mood music, inflation will fall back, base rates will remain unchanged and employment growth will be solid, suggesting that the economy will grow at roughly the same rate as in 2016.”
In January this year, JLL surveyed nearly 400 guests at its predictions event held in London where they were asked what they expect returns in the UK property market to be in 2018.
About 60 per cent of respondents said 4-8 per cent, in line with JLL’s own 6.4 per cent prediction. Attendees were also asked what they expect their level of investment in business or property to be by 2021, with 46 per cent saying somewhat larger than levels seen today.