Yes it is true – the commercial property market has recovered and is not heading for another fall – ‘but only in central London’!
When the financial crisis began, every single commercial property throughout the UK fell in value. However, this was relatively short-lived in central London, compared to the rest of the UK, as pension funds, overseas buyers and cash-rich individuals resumed searching for safe, long-term investments. Once the tenants who occupied these properties looked like they were on the road to recovering, the values of these central London properties accelerated even more, beyond anyone’s comprehension. However, over the past few months, there has been a marked slow-down in the pace at which these investors have been buying prime real estate and it seems as if prices may have finally peaked.
What about the rest of the UK, I hear you say? Well that is a completely different matter. The Head of Lloyds Banking Group’s Business Support Unit, Richard Dakin, said “We are working on the basis that we will see little capital value growth for the next three years, and rental prospects outside of London also don’t look good”.
His comments have been echoed throughout the property industry and as a company which is mainly offered secondary and regional property, I unfortunately must agree with his view. We are being offered properties today, which we were offered a year ago, which have fallen in value by as much as 20%. Although I do not see similar falls in the coming 12 months, I still think there will be further declines and when the bottom has been reached, whenever that may be, I think we will be in for a long period without any growth whatsoever.
Therefore, is now the time to sell? Well that depends. If you are able to sell now, and make a profit, then I would say yes. Don’t forget, if you are selling today, at a level which is less than you could have sold for a year ago, but the price you are getting is still higher than the price you paid, you will still be making a profit. Furthermore, if you sell today and incur a loss which you can live with, then I would again say sell. After all, it’s better to sell now and suffer a loss which you can recover from, as opposed to holding on and facing the possibility of further falls which could result in you suffering a loss which you may not be able to recover from.
In times like these, where the future is uncertain, and the vast majority of data and statistics show that the market is heading for another fall, if you can get out now, I would say do so and leave your problems to somebody else. People who do not have a great deal of experience investing in property are more likely to suffer heavier losses than the more experienced ones.
Property is now a long-term game where knowing the market is key to surviving and having deep pockets and a great deal of time on your hands is essential.
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