The result all real estate solicitors feared came to pass last week. Now what? This is my view on the various sectors
Residential domestic property
I think we are in for a period of sustained inactivity here. Sellers won’t sell because prices will notionally drop. Buyer’s won’t buy for fear of taking on additional commitments in a time of uncertainty. Lender’s will tighten lending criteria and so the availability of funding will be limited. This all goes towards creating a perfect storm of Brexitness.
I’m not sure about this one. I expect good covenant decent yield property to still trade well, albeit there may be a minor downward adjustment in prices due . I still have concerns as to the availability of mortgage funding but those with cash and the institutions will look to hoover up the best deals. I expect the secondary and tertiary markets to slow significantly as buyers question investing in lower quality assets.
This is the one area I expect to remain active. As prices adjust downwards, so the dealers will look to pile in. The only argument against this is whether the dealers can accurately assess their exit valuation. In addition, competition for trading deals will intensify as a larger pool of buyers goes after a smaller number of properties.
This is the biggie. The Central London new build market is already finding it tough. Far Eastern buyers have desparately been trying to re-assign off plan contracts, sometimes at a loss, as currency restrictions and other global issues limit their ability to cash fund completions. In the short term I expect to see prices marked down on London new build property , particularly apartments in areas of over supply and particularly given the impact of the recent stamp duty land tax changes.
In general terms I expect developers to be hit by a lack of buyers and a lack of mortgage funding for buyers. Great deals may be available for those whom can perform but I wouldn’t be long on developer shares right now.
Just my personal views and not to be relied upon of course, but I think all of us scared and twitchy property solicitors need to be battening down the hatches, running our teams as economically as we can, and hitting the marketing and networking trail harder than ever. Treat it like a recession because that’s probably what’s coming.
One wise sage has said after reading my blog that recessions are built on negative sentiment such that they become self fulfilling prophecies. They may well be right.
All I seek to do is give a view on the short term future of our industry based on facts available today. I may be right, I may be wrong, but one thing is for sure, it would be criminal not to have a contingency plan.
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