According to the results of the survey, over half of respondents said London prices would rise in 2017 albeit at a slower rate than in the past, around a third thought prices would plateau and 14% said prices would fall.
Asked to name which region outside London would attract the most real estate investment over the next 12 months, the South East came top (at 28%), followed by the North West (18%), while the South West and West Midlands came joint third (at 11% each).
A majority of those questioned said that the rising cost of housing in London and the South East will create further growth in the private rented sector (61%) and an increase in conversions from office to residential accommodation (53%).
Quizzed on the likely impact of interest deduction proposals, opinion was divided between those who thought there would be no impact (38%) on the number of residential real estate acquisitions and those who thought the number would reduce (37%).
Regarding the prospects for the commercial property sector, almost two thirds predicted that overseas investors will continue to play an important role, accounting for between 30 and 60% of all commercial property investment in 2017.
The survey, conducted among property investors, developers, lawyers, bankers and agents, also revealed that more than 70 per cent anticipated that the cost of borrowing would remain the same over the coming year, while 8 per cent believed that borrowing costs could fall even further. The findings pointed towards an increasing availability of funding through alternative sources of finance such as debt funding, private equity or crowdfunding. However, property acquisitions continue to be funded predominantly by traditional bank loans.
Howard Freedman, RSM’s head of real estate and construction said: ‘2016 has been an eventful year for the UK real estate sector. There was significant growth in 2015 with a considerable number of deals concluding throughout the year. At the beginning of 2016, however, the sector paused for breath. Transaction levels started to fall amid concerns that the market was topping out. The EU referendum added further uncertainty and changes to Stamp Duty Land Tax rules and updates to income and inheritance tax also cooled the residential market, particularly in Central London.
Our latest survey shows that despite these setbacks, there is a degree of optimism around price growth in 2017, with a renewed interest in the prospects for the UK regions. There is of course concern around a lack of investor interest following the Brexit vote, but our survey suggests that over the long term the UK real estate market remains one of the more favourable opportunities for both domestic and overseas buyers.
Now more than ever, investors and developers must focus on the fundamentals of property investment: location, sub-type and quality of tenant. Those that hold their nerve and stick to these principles will reap the biggest rewards in the year ahead.’
