MARKEToverview
However, escalating oil prices and the
consequent increase in red diesel over the last two years from 28p to 65p per litre, is having a marked impact on the cost of inputs. In addition, straw shortages and the resulting high price are affecting livestock farmers, many of whom are looking for alternative bedding materials – sand, waste paper products and even shredded tyres. It’s also likely that fertiliser prices will rise again, whilst the possibility of a carbon taxation regime relating to agricultural production could be on the cards. Ultimately, the price of agricultural land may well continue to rise, but it looks likely that the costs associated with producing food will also do so, impacting significantly on profitability.
CRITICAL AND VOLATILE Residential
It’s difficult to generalise about the residential market because there are significant regional fluctuations. We have heard numerous negative headlines, but in many areas it actually out performed expectations in the second half of 2010. In the East Midlands, sales remained steady in the better areas. This is reflected by the general national trend of an increasing demand for higher quality houses, whilst supply diminishes. The picture has some black spots and the economic downturn has had a negative impact in regions that have suffered large scale industrial closures. The evidence suggests that house prices have fallen by approximately 30 per cent since the market peak of 3–4 years ago and now appear broadly in line with 2004 prices. Latest figures estimate that the average UK house price is now £163,000, 0.4 per cent higher than 12 months ago, so fundamentally things remain stable. The next quarter will be critical in
residential property for all areas of the UK, and the way that the market performs is likely to set the tone for the remainder of
Commercial A MAGNET FOR INVESTMENT
The commercial market performed more strongly than anticipated last year, possibly due to lower valuations attracting investment from overseas investors who were also able to benefi t from the weak pound, but it looks as if the market in 2011 will remain steady – a period of consolidation than headline grabbing growth or decline. The picture isn’t straightforward
however, as the commercial market has been split in two for sometime, and is likely to remain that way for the foreseeable future. At the lower end, whilst vacant possession premiums are achieved, sales of smaller investment properties are virtually non-existent. Fortunately, this is balanced out by the fact that the market in modern, effi cient buildings, placed into ‘owner occupied’ self-invested pension schemes remains active.
At the top end of the market, there
are reports of extraordinary capital values being achieved for the best investment properties. However, some people may get their fi ngers burnt where they are buying ‘paler’ blue chip covenant investment properties. One exception is that reoccupation of vacant shops has continued – but the rentals on these re-lettings are signifi cantly lower.
Property is the fruit of labor; property is desirable; it is a positive good in the world.” ABRAHAM LINCOLN
38 MAY 2011 PROPERTYdrum
What is more agreeable than
one’s home?” MARCUS TULLIUS CICERO
2011. If the market picks up, we can expect to see the stirrings of recovery in house prices but if the next 8-12 weeks remain flat, then a period of longer term stagnation in house prices is more likely. However, we remain cautiously optimistic that, providing interest rates remain low, we have seen the worst of the property price falls and anticipate that the latter half of 2011 will be more positive for the residential sector.
ANXIETY, BUOYANCY AND HOPE The property market is a volatile and delicate thing. It provokes anxiety in so many because it affects us all – the one thing that most people cling to in times of uncertainty is their home. The importance of maintaining that stability has been heightened by stories of mass redundancies, industry closures and stringent cuts. However, there are still some areas of the market within the commercial, agricultural and residential sectors that remain relatively buoyant. As always, there is still money to be made and careful research and investigation of opportunities can pay dividends in such a market. In fact, a period of stability to regroup and plan, rather than the unsettling peaks of growth and troughs of decline, may ultimately be better than we could have hoped for during these uncertain times.
Andrew Robinson BSc (Hons) MRICS, is a partner at Andrew Granger and Co., one of Leicestershire’s largest independent chartered surveyors and estate agents.
www.andrewgranger.co.uk
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