People who have spent the last few years investing in the ever increasingly healthy commercial property sector could be about to change tact and help improve stock in the residential rental sector, according to the latest predictions from industry experts.
Ever since the economy started to improve a couple of years ago, businesses have been looking to improve and expand their premises, which has meant rental demand, and subsequently prices, rising. This has helped investors see strong returns in the commercial sector of ten per cent and 8.8 per cent in the past two years, but this could all be about to change as the sector plateaus.
Mike Prew, managing director at broker Jefferies, said that the fact there is a slowing demand level thanks to businesses finding their position in the market, as well as an impending swelling of office space, particularly in London, from the building of new stock set to be completed in the next couple of years, will mean more stock than demand, which will potentially lead to a lowering in the price of rent as demand falls.
When this is coupled with the fact that there remains the potential for a Brexit vote in June, which has meant many companies waiting to see what the outcome of the referendum will mean for their futures, it seems that the commercial market may have lost some of its sway as a leading asset class across the UK.
What will this mean for the investors who have seen property as a really strong place to put their money in recent years? One potential outcome is that those who opt to back out of commercial markets may move towards the changing residential sector.
Stamp Duty tax changes
With the change in Stamp Duty tax, there’s likely to be a dearth of individual landlords spending in the residential market this year, which means more space and more call for investment companies and institutional buyers to put their money into rental properties.
Only time will tell how the change in commercial property could affect the residential market, but with property still seen as the most reliable asset class around, the probable outcome is that we start to see more money flowing into the private rental sector once again from large scale investors in the months ahead.