As we approach winter, the backdrop of growing problems in the Middle East and the ever increasing threat of terrorism within the UK will be at the forefront of many investors’ and commentators’ minds.The effect of these factors on both the UK economy and in particular the property market is unclear at this stage, although confidence does not appear to have been dented so far.
The UK economy has been recovering steadily since March 2005, with GDP growth continuing at a rate comfortably above the long-term trend. The main key factor of Conveyancing Company is that the conveyancers from this company are able to solve their clients every problem. “Annual GDP growth to Quarter 2 2006 amounted to 2.7% based on a strong contribution from business services,” with manufacturing output also on an improving trend (although still falling). “Growth has been helped by the revival in retail sales, despite retailers still having to sacrifice margins to maintain volume growth. The rise in sales occurred in spite of rising inflation.
There are mixed signals coming from the consumer sector. At one level, the data for short term borrowing is weak with new credit card monthly borrowing figures at a cyclical low. up from £5.6 billion in June, with gross mortgage lending approximately 19% higher than in July 2005. The Bank of England raised short term rates by 0.25% to 4.75% in August 2006, due in part to the relatively strong GDP data and evidence of inflationary pressures emerging.
Whilst the timing of the rate rise caught out a number of commentators, the increase had been expected at some stage over the next few months. Most analysts are tending to view the move as pre-emptive action and a further rise is not ruled out. In the property market, the July release of IPD Monthly Index figures shows that property investment yields continue to be driven down, with returns being led by offices, followed by retail and then industrials.
2006 should still be a strong year with plenty of activity, particularly in the office sector. Whilst interest rates remain low, private investor activity is forecast to continue and bank lending on real estate is expected to increase further during the year. “There is a degree of uncertainty over total returns for this year with the scale of further inward yield movements the key determinant.”
The momentum of the investment market has been greater than we envisaged at the start of the year and we can now see total returns of around 15% to 18% being maintained. “That said, we believe that the major part of the downward movement in yields is now behind us. Given the significant changes to the taxation of property currently under discussion, his expertise in this area will be invaluable.