On 21 September, the IoD Property and Built Environment Special Interest Group (PBE SIG), which is chaired by Abyss’ Managing Director, Richard Nelson, hosted around 50 people at Barclays amphitheatre space in Moorgate, central London, for their Q3 Economic Update event.
A nearly equal split of members and non-members braved the rains to hear the incredibly high-calibre speaking panel, which included:
Neela Chauhan, Partner at UHY Hacker Young
Rebecca Shafran, Senior Associate Director at BNP Paribas Real Estate
Victoria Bajela, Director at Savills
The evening was expertly chaired and moderated by PBE SIG Vice Chair, Perminder Ghataore (Managing Director of Finance House Solutions Ltd), while PBE SIG Chair, Richard Nelson, presented an overview of the Institute of Directors (IoD) and our PBE SIG’s activities.
The panellists discussed how the current economic situation is impacting real estate investment, development and construction; the impact of taxation on property investment; and what is happening in residential and commercial real estate markets, including some very useful data in sectors like student housing, senior living, built to rent, offices, life sciences, retail and hospitality.
The outlook was generally positive, particularly with the Bank of England’s decision not to raise interest rates earlier that day, which perhaps signalled the peak of rate rises.
Neela Chauhan’s focus on tax was particularly eye-opening for owners of UK real estate, as several reporting requirements have been introduced in recent years, particularly affecting foreign owners, such as the Registration of Overseas Entities, Registration of Trusts, Annual Tax on Enveloped Dwellings (ATED), and Non-UK Resident Landlords (NRLs).
In addition, there are a number of taxes to consider, such as Stamp Duty Land Tax (SDLT), Capital Gains Tax (CGT), Inheritance Tax (IHT) and Value-added Tax (VAT). Chauhan noted that owners should seek professional advice in order to ensure they avoid potentially onerous penalties, which can include substantial fines and even imprisonment, in certain cases.
Rebecca Shafran looked at residential property markets, which are all in positive territory against a backdrop of falling unemployment and rising incomes. However, housing ladder aspirations for first-time buyers are starting to drift due to the price of property, particularly in cities such as London. This demand is being redirected to the rental sector, where property types such as Built-to-Rent (BTR) are experiencing high demand, and indeed becoming a preferred lifestyle option for many under 35s, according to research by Strutt & Parker, a BNP Paribas Real Estate company.
Additionally, an ageing population is driving demand for senior living and retirement communities, as we are expecting the population of over 75s to increase by more than 1.2 million in the next 10 years.
At the same time, a post-pandemic resurgence in UK university applications, particularly from overseas students, is swelling demand in key cities for purpose-built student accommodation (PBSA).
Victoria Bajela rounded out the night with a look at commercial property markets. Her presentation was prepared before the interest rate hold earlier that day, so she admitted that the forecast may have to be adjusted slightly, from a skew to the downside, to potentially a more moderate outlook, so watch this space.
Although a plateau in London prime office pricing was thought to have occurred in Q1 2023, that positivity waned in Q2, as new heights were being reached for pricing of prime product, largely due to lack of high-quality, well-located product.
Much of the dynamic in the office sector now has to do with occupier preferences for high-quality, eco-friendly, well-located space, which they are willing to pay a premium for – for example, good grade-A London offices with a roof terrace can fetch as much as a 14% rental premium!
Victoria took a quick look at the Life Sciences, Retail and Hotel sectors as well. Life Sciences is an emerging sector with a lot of demand in markets such as London, Oxford and Cambridge, but a lack of supply, which is driving growth.
The signs were encouraging in the retail sector, as London West End retail spend for 2023 was finally back to pre-pandemic levels, and likewise in the London hotel sector, which she noted is 30% up on pre-pandemic levels – somewhat thanks to the USD to GBP exchange rate, which is driving a rebound in tourism from the US and elsewhere.
Long-time IoD member John Muldoon was the lucky winner of the champagne raffle, presented to him by Nelson and Ghataore.
The group’s Q4 Economic Update will be held at Barclays Moorgate on 7th December 2023, and you can check their website here for announcements.