Politically these are unprecedented times. A new BREXIT withdrawal deal has been agreed with the EU but it was always going to be a challenge to get the necessary approval from Parliament by the 31stOctober and an extension to 31 January 2020 has now been granted.
Meanwhile, Parliament has finally agreed to the Prime Ministers demands for a general election and the country will go to the polls on 12 December. Boris Johnson has gambled on a winter election and the expected outcome is by no means clear. It seems the current political uncertainty will remain, at least until the election is over and the BREXIT withdrawal deal is ratified, or perhaps there will be another outcome?
The UK economy returned to positive growth in Q3 2019 of 0.3% following contraction in Q2 of 0.2% and thus a technical recession has been avoided. The highlights have been the strength of the services sector and jobs growth, the economy is however bumping along, having lost momentum in the past year and even the services sector contracted in September. GDP is expected to continue in a similar vein for the remainder of 2019 and early 2020. Whilst some of the poor performance is related to the global slowdown it seems that ongoing BREXIT uncertainty is having an increasingly negative influence on decision making and investment.
The effect on the real estate markets has been a further reduction in transactional volumes across the sectors but there are still deals being done, particularly in the alternatives, industrial and office markets and there remains demand for retail where pricing is appropriate and in particular lot sizes are small, income is strong and the asset defensive.
The residential markets remain busy in the regions but less so in London and the South East but there is a growing view there are good opportunities to buy now and the Student and Build to Rent sectors are very active.
In summary, there is a robust economic case in the UK, but we foresee the political uncertainty continuing to drive the agenda and this will remain the dominant force in the real estate markets for now.
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