GVA Grimley - Economic & Property Review - 2nd Quarter 2003
The following are a summary of the major findings of the GVA Grimley (International Property Advisers) Economic & Property market review. The findings assess the current condition of the property market and economy and predicted future trends.
- In the UK, EU and USA, economic growth in 2003 is expected to be almost identical to growth in 2002. This means a continuation of below trend output performance and minimal employment growth. An improvement is expected in 2004.
- The economic outlook will mean further weak occupational property demand this year and next year, improving slowly thereafter. GVA Grimley expects low rental growth over the next 18 months and an average of 2.3% pa over the next five years.
- The housing market is due for a period of lower price inflation but not a crash.
- Weak commercial occupational demand and rental growth will inevitably affect the investment market, particularly if the stock market continues to improve. However, low interest rates and relatively attractive initial yields, should maintain property's attraction to private investors. GVA Grimley expects a 7% overall return in 2003, with slightly higher returns in each of the next four years.
- In the retail sector, year on year rental growth has improved over the last 12 months from 1.6% to 2.6%.
- For retail warehouses and shopping centres the picture is more optimistic, with year on year growth in March of 4.5% and 3.2% respectively.
- The office sector is split between negative rental growth in London and the South East and weak, but positive, growth in provincial markets.
- In the industrial sector rental growth continues to weaken slowly, but growth is still positive. Unlike offices, industrial rental growth is strongest in London.
- The investment market remains strong, fuelled by low interest rates and borrowing costs. All property returns over the last 12 months were 10.6% in March, much the same level as they have been for sometime.
- Year on year retail returns were 15.3% in March and 4.3% for the office sector in the same period.
- The industrial investment market is a picture of relative stability, year on year returns have remained remarkably constant, at 10.3% in March 2003.
- Interest rates are likely to remain low in 2003, and with no significant rise in unemployment expected, a crash in house prices is very unlikely.
- Low interest rates and moderate income growth have offset house prices increases, keeping the relationship remarkably constant over the last 10 years and much lower than throughout the 1980s.
- The GVA Grimley analysis over the lifetime of a mortgage suggests that, taking all this into consideration, houses are not overpriced, so a major correction is unlikely.
To read this review in full please visit www.gvagrimley.co.uk