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After a period of political and economic upheaval which has involved three Prime Ministers in two months and market turmoil, we look to take stock of the residential and commercial property
markets in the third quarter of 2022.
Firstly, in terms of the housing market…
The ‘RICS Residential Market Survey’ results for September 2022 give an outlook that is
understandably gloomy, given the cost of living crisis and rising interest rates which are affecting
affordability and sentiment amongst buyers. New buyer enquiries are falling, as are agreed sales.
Interestingly though, the survey confirms that prices are in fact still rising – thanks to a lack of new stock coming onto the market. Meanwhile, Lloyds Banking Group has forecasted an 8% drop in house prices next year with prices stagnating thereafter. Again, this gives the impression of a significant downturn but context is required here – an 8% drop will see prices remain well above 2020 levels, and the Lloyds prediction is that prices will stay at these levels for the next four years.
Rather than forecasting a ‘crash’, Lloyds seem to be expecting a modest correction and then a period of relative stability within the market. Some would say this does not sound like such a bad thing. At the time of writing, other lenders such as HSBC and Virgin Money are now reducing their interest rates on some mortgage products from the sky-high levels we’ve seen over recent months.
Tough times are ahead for sure, but the housing market may be more resilient than the mainstream media would have us believe.
Turning to the commercial property market, the RICS Commercial Property Monitor for Q3 2022
reports that 81% of respondents now feel the market is in some stage of a downturn.
The success story over the last few years has been the industrial sector, which has seen increased
levels of demand and has carried the whole market to a degree – making up for stagnancy in the
retail and office sectors. Interestingly, the RICS Commercial Property Monitor now reports that
sentiment is weakening in the industrial sector too; albeit only slightly.
The phenomenon of home working has arguably played a part in the drop in occupier demand for office space. Some workers have made the switch permanent whilst others have returned to the office. Hybrid working is also proving to be a popular option for firms and employees. The net result does appear to be an overall reduction in the office footprint of businesses, which could lessen demand for the larger office spaces in particular.
Conditions within the retail market have generally gone from bad to worse – with the exception of smaller neighbourhood units in more affluent locations. Again, factors created by Covid (further increase in online shopping, damage to the hospitality sector etc.) have not been kind to the high street.
In summary, the picture is mixed. The pace of economic change is fast at the moment, which makes it difficult to forecast what may happen next week, let alone next year. There is at least a hope (albeit not an expectation) the markets might be allowed to stabilise for now.
Lea Hough has an experienced team of Chartered Surveyors with office bases in Blackburn, Preston, Lancaster, and Greater Manchester. Our team of Chartered Surveyors and RICS Registered Valuers are skilled at undertaking all types of residential surveys such as Home Surveys, Valuations and Building Survey Reports; and all types of commercial property surveys such as Pre-Acquisition Conditions Surveys, Commercial Property Valuations, Schedules of Condition and Schedules of Dilapidations. We cover the whole of the Lancashire, South Cumbria, and Greater Manchester areas.
To access any of our services, please get in touch.
Article prepared by James Leech.
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