Confidence among real estate and construction directors moves into positive territory, states the IoD’s Property and Built Environment Director’s Confidence Index.
The Index which measures real estate and construction business leader optimism in prospects for the UK economy, rose to +8.7 in May, up from -2.6 in April, and -18.0 in February. (See chart.)
The PBE DCI is prepared by the IoD Property and Built Environment Group board, using data obtained by the IoD’s Policy Team for the overall IoD Director’s Confidence Index.
The PBE DCI results largely followed the overall IoD index, which looks across all business sectors, which is at -3.0, its highest level since September 2021.
“It is good to see the industry is firmly net optimistic, with a positive trend,” said Richard Nelson, Chair of the IoD Property and Built Environment Group.
“Drivers of optimism in the industry right now could be continuing investments in infrastructure projects, and continued strong demand in ‘beds, sheds and meds’ projects, including residential for rent, student housing, senior living, warehousing and logistics, storage facilities, data centres, and healthcare and life sciences facilities,” he added.
Another potential reason for optimism in the sector may have been explained at the group’s ‘Q2 Economic Update’ event which was held on 6th June.
Guest speaker, Michael Bristow, CEO and Co-Founder of development lender CrowdProperty highlighted that SONIA swap rates – the rates that banks pay for their money – fell into the 3+ percent range for 5+ year loans just before Christmas 2023.
SONIA swaps is probably the most important indicator to watch for property cost of capital, says Bristow. Lower SONIA rates enables lenders to secure money for lending at lower rates, which means they can offer lower interest rates to borrowers, i.e. property developers, which many have been doing since this shift.
The result was a significant amount of lending activity in the first five months of 2024, which, when combined with property investors’ healthy cash reserves, may signal a rise in investment transactions from September this year, predicts Bristow.
The PBE DCI will be updated monthly.