Market outlook

Looking ahead - is it time to build your portfolio and take advantage of the yield shift?

We think that the market is saying “yes”

There are signals that it is time to enjoy the prices as they are before rates and inflation come down any further and anxiety is still in the air.

There are many reasons – mostly drawn from listening to and watching our buyers’ behaviour.

Buyer numbers improved in the last quarter of 2023 and we have been seeing buyers we know of old emerge more recently for the better quality lots. The profile has changed from opportunists to more very long term investors, cash rich family office style portfolio buyers who are keen to build their portfolios. In nearly every case our survey shows that they have appetite to keep buying.

The reasons are manifold of course, linked to a long period of falling prices and increased yields, with the twin drivers of inflation and increasing base rates seemingly in reverse and a more certain economy.

Specifically in retail, occupational demand has become clearer to predict after many years of change and our clients report that demand from tenants has improved. Many are seeing voids below 5% across their portfolios and this may well lead to rental growth in the best locations.

Private investors, armed with knowledge and financial strength, are poised to act, embodying Warren Buffet's wisdom of being opportunistic when others are cautious.

This may well be the point in the cycle when we will begin to see improved volumes, as we have seen increased lot sizes as sellers match buyers’ expectations on pricing – which will generate further competition in the auction room.

Anticipated political shifts and the upcoming Tory budget in March may add uncertainty, and potential tax cuts are more likely to stimulate the residential market. However, predicting Labour's economic plans may have a more lasting effect on real returns.

The most important factor that will deliver the opportunities that our market seeks is where sellers are able to sell at levels that the market dictates. This will be defined at least in part by their Valuers who now have the evidence they need to bring pricing into line with the market. We plenty of examples to support that generous pricing will drive the end price as buyers compete.

The supply of opportunities is always hard to predict but with an average lot size of £1m reached in the October sale we see this trend continuing. We are already in the market with lots for the February auction, the largest at a guide price of £7,000,000 and two others above £4,000,000 where we are combining the forces of both a Private Treaty and an Auction sale. As always this relies on accurate information from the outset and of course the unconditional auction contract to effect the exchange, no matter the lot size.

There are 60,000 buyers on our database who are anticipating well presented and sensibly priced assets, spanning generations of auction buyers who are ready and waiting to build their portfolios in 2024 and beyond - often focussed on the long term.

We believe that demand will continue to build and 2024 will see improved volumes on last year.