best investment opportunities 2019
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Where are the best investment opportunities for 2019?

With 2019 fast approaching, we asked some of the UK’s leading fund managers to highlight the stocks they are watching closely and to share their outlooks for the new year.

As 2018 draws to a close, there is much to feel nervous about.

The UK is set to leave the European Union in March 2019 and a deal is yet to be agreed; investors have experienced a profound sell-off over the past few months; trade tensions have escalated between the US and China; and the global economy appears to be cooling.

“Global growth is getting harder, with the trade war having a particular impact on China. The US too is finding growth more difficult, as the Trump stimulus package wanes,” explained Jeremy Lang, manager of the Ardevora UK Equity fund.

“There was nowhere to hide for investors in the recent market sell-off, as traditional areas of shelter did not provide any safety,” he added.

Lang suspects that 2019 will be much like 2018, with the market experiencing “many wild mood swings”.

UK outlook

When it comes to the UK market, he notes there appears to be “more palpable gloom and little optimism”.

“This undoubtedly drives strong investor desire for overseas earners.

We are now enticed by areas of the market most other investors hate, as there are increasing odds of a surprisingly benign outcome.

“While still small, the odds of another referendum and a remain verdict are far better than they were weeks ago. Even if we were to see a second referendum, there are going to be a number of hurdles and pockets of anxiety along the way,” he explained.

With this in mind, Lang and co-manager William Pattisson have reduced their fund’s exposure to commodity stocks which earn a large proportion of their earnings overseas.

“We used the proceeds to buy into more domestically-focused value opportunities, such as Travis Perkins,” he added.

Ken Wotton, manager of the LF Gresham House Multi Cap Income fund, notes that Brexit is likely to cause further volatility in the UK market. Nevertheless, investors must remember that this will create selective opportunities.

“While large-cap businesses are generally impacted by macro factors, the agility and niche positioning of smaller companies may allow them to react positively to broader economic headwinds,” he said.

He believes Inspired Energy, which provides energy advisory services, is poised for strong performance in 2019.

“While it advises mid-sized corporations, Inspired Energy is paid in commission from contracts with large energy suppliers, with payments based on the energy usage companies incur. This guarantees multi-year revenue and high earnings visibility for the business,” Wotton said.

Phil Harris, manager of the EdenTree UK Equity Growth fund, notes that the unforeseen variables and endgame scenarios surrounding Brexit may feel like attempting to play “three-dimensional chess”.

In spite of the political headwinds, he is encouraged that the UK economy has so far proven robust.

“With sentiment at multi-year lows and UK valuations reflecting this, we expect to find multiple opportunities across the UK small and mid-cap space for us to deploy our current high levels of cash,” Harris explained.

Better opportunities elsewhere

David Coombs, who manages the Rathbone Multi-Asset Portfolio range, and assistant manager Will McIntosh-Whyte note that Brexit has so far divided the nation and slashed the amount that businesses have invested here.

“Yet the UK has muddled through so far. Wages are rising, albeit slowly, retail sales were okay despite some high-profile high street failures and business surveys remain in expansionary territory. We don’t think the UK is doomed, but we see better investments elsewhere,” the managers explained.

Looking ahead, as central banks around the world tighten monetary policy, the managers suspect that share prices will come under pressure.

“That’s just the way valuations work: as the rate you get for taking zero risk goes up, the value for risky cash flows goes down. While this will likely cause another bumpy year for stock markets, it does come with benefits.

“Government bond yields are returning to levels where they should offer better protection for portfolios. And for rates to rise, that’s usually because countries are growing and deflation is out of the picture,” they added.

Against this backdrop, Coombs and McIntosh-Whyte expect well-run businesses with low debt levels to prosper.

Source: Your Money

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Scottish housing market bucks UK trend

Average house prices in Scotland have hit their highest ever level, despite the struggles facing the property market in England and Wales.

According to data from Your Move, the average house price in Scotland is now £184,569 – up 1 per cent month-on-month and 5.5 per cent year-on-year.

This is the highest average ever, above the March 2015 peak set by the spike in prices immediately ahead of the introduction of the Land and Buildings Transaction Tax.

Meanwhile, UK-wide house price growth has fallen to its lowest level in more than five years amid concerns about a no-deal Brexit and further interest rate increases.

Christine Campbell, Your Move managing director in Scotland, said: “Setting a new peak average price at a time when many parts of the UK are struggling to maintain prices is a significant show of strength from the Scottish market. Scotland continues to defy the pessimists.”

Your Move’s analysis said there were not particular circumstances which explained this rise, and attributed it instead to a gradual increase over the past three years.

The increase has also been broad-based, with Edinburgh reporting an increase of 10 per cent over the past year and Glasgow seeing prices go up by 9 per cent.

Meanwhile areas such as Angus saw prices go up by 11 per cent while Na h-Eileanan Siar saw house price rises of 12 per cent.

Alan Penman, business development manager for Walker Fraser Steele, one of Scotland’s oldest firms of chartered surveyors, said: “Despite any uncertainty surrounding Brexit, the Scottish market could hardly hope for a better position from which to face whatever challenges the next few months bring.”

Source: FT Adviser

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Buy-to-let specialists are thriving

Figures recently included in the Mortgage Market Tracker from the Intermediary Mortgage Lenders Association suggest brokers saw the largest drop in business volumes in the third quarter of 2018 that they’ve experienced in more than two years.

This hasn’t been our experience in 2018 at all, which is most likely down to us deliberately taking a strategic approach to our positioning. Even in a market where buyers, movers and developers are choosing to sit on their hands, we’ve concentrated on areas of the market where we know we can add significant value.

There are a number of trends that have affected the shape of lending in 2018, the most significant being the impact of changes in taxation and affordability testing in the buy-to-let market. The reduction in tax relief on buy-to-let mortgage interest and the tougher stress-testing rules from the Prudential Regulation Authority are beginning to have a visible effect on lending trends.

Limited company buy-to-let has been a big win for us this year, as has our commitment to offering flexible affordability criteria to landlords with other sources of income.

Adding value to investment properties at the outset has also been a focus for landlords increasingly this year. We’ve helped landlords by adapting our application processes for short-term bridge to let and launching our new Refurbishment buy-to-let proposition which features a double proc fee and single application.

We believe this demonstrates both our commitment as a lender to supporting our borrowers and introducers, and also illustrates the value that a specialist lender can offer in today’s market.

Buy-to-let remortgaging has been a significant part of the market this year, and that’s not accounting for product transfers in buy-to-let. The big high street lenders have necessarily had to focus on retention in 2018 as margin pressures have got tougher and transaction volumes have remained subdued.

That has opened up an opportunity for specialist lenders to plug the gaps created by these shifts. We’re big enough to make a meaningful difference to the supply of specialist buy-to-let finance and nimble enough to be able to flex our criteria and underwriting to adapt to the needs of borrowers in a changing market.

What’s in store for 2019? Well, that remains to be seen. But I suspect that it will be a year in which smaller specialists continue to thrive.

And, rest assured, that we will remain committed to supporting brokers and borrowers whose needs are not being met on a high street increasingly under pressure.

Source: Mortgage Introducer

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Nationwide Buy To Let Review Of The Year

The private rental sector nationwide has remained robust through 2018, despite dour predictions as last year drew to a close. The theme of 2018 has been regulatory impact, ranging from the imminent implementation of the Tenant Fees Bill to the persistent teething problems with the notorious Right to Rent.

Criminal landlords have found it increasingly hard to operate; a London landlord checker and a £2 million rogue landlord fund have vowed to clean up the sector. While Brexit has been a looming spectre over the year, ‘uncertainty’ remains the key descriptor and its likely that ascertaining its true impact will be a job for next year’s review.

A quieter housing market was seen throughout the year. House price rises have slowed, according to Nationwide, dropping to their slowest pace since May 2013 in October. Economic uncertainty, stemming largely from Brexit but also a nationwide tightening of the purse strings, encouraged a slump in house prices.

The Tenant Fees Bill has been a cause of controversy nationwide throughout the year.

June 5th saw the first sitting of the bill. It was at this point that the issue of the deposit requirement was first raised. MP Sarah Jones argued that currently, the majority of landlords require a 4-week deposit. However, should a 6-week cap be imposed, it is likely that the majority of landlords would raise their deposits to match this figure.

In contrast, the National Landlords Association (NLA) argued that a limit of just one month limits flexibility in tenancy requirements. They took the unlikely angle of defending the nation’s pets – suggesting that properties who permit furry friends should be entitled to demand a larger deposit to cover potential damage.

The bill was generally met with discern by landlord bodies, with ARLA Propertymark citing its own research as saying tenants nationwide will end up worse off with a fee ban due to raised rents, rather than seeing a more affordable private rented sector. The RLA complained that by taking months to become law, the bill is inefficient and suggested that far quicker changes could have been made.

In spite of criticism, the bill pressed on and towards the end of November, the second reading for the tenant fees bill saw it pass through the House of Lords without amendment. The third and final reading will come after the report stage, although the deposit cap remains a contentious issue.

While the Tenant Fees Bill has been a steady presence throughout the year, it has been all but overshadowed by the constant controversy surrounding Right to Rent, an issue amplified by the Windrush Scandal which saw a number of British subjects who originated from Caribbean countries as part of the ‘Windrush Generation’ wrongly deported and denied citizenship rights such as medical care. The issue arose as a direct result of Theresa May’s ‘Hostile Environment’ policy, the same policy which saw the implementation of Right to Rent.

Right to Rent requires that landlords determine whether their tenants have the right to remain in the UK, facing criminal charges if they fail to do so. As a result, research from the Joint Council for the Welfare of Immigrants (JCWI) found that 51 per cent of landlords are now less likely to let to foreign nationals. 2018 saw over 400 fines issued to landlords, amounting to £265,000 by the end of March, although this figure included fines from the previous year.

The policy has seen two separate legal challenges launched against it in 2018, following claims that the legislation forces landlords to ‘act as border guards’.

The first case was launched by the JCWI. Legal policy director at JCWI, Chai Patel, said: ‘The right to rent policy is designed to encourage irregular migrants to leave the country by making them homeless. The problem with it, apart from the inhumanity of that proposition, is that there’s no evidence it works. The Home Office hasn’t shown that the scheme will do anything to increase voluntary departures, which have actually reduced since the scheme came into force. Worse, the scheme causes discrimination against foreign nationals even if they have immigration status.’

He continued: ‘It also causes discrimination against British citizens who don’t have passports. Faced with our evidence, the Home Office has buried its head in the sand and refuses to review the scheme before forcing it onto Scotland, Wales and Northern Ireland. We have no choice now but to challenge this pernicious and ineffective policy through the courts.’

This was met with support from landlords, who have condemned the policy. The RLA supported a judicial review of Right to Rent, arguing that landlords nationwide should not shoulder these responsibilities.

A second challenge comes from a woman who faced eviction after her landlord was told she did not have permission to reside in the UK after the Home Office lost her passport when she applied to extend her visa. The woman’s lawyers are in the process of arguing that the ‘right to rent’ policy is not compatible with the Human Rights Act.

Finally, independent chief inspector of Borders and Immigration David Bolt has condemned the scheme, writing in a foreword to his report that the policy has ‘yet to demonstrate its worth as a tool to encourage immigration compliance’.

However, while it appears universally accepted that the policy has brought little good to the sector, it served its creator James Brokenshire well when he was promoted to Secretary of State for Housing following Amber Rudd’s resignation during the Windrush Scandal and Sajid Javid’s promotion to Home Secretary.

While the Tenant Fees Bill and Right to Rent might have dominated the headlines during 2018, there has been plenty of lower profile legislation adding to the regulatory landscape for landlords.

Councils have been granted new powers to crackdown on rogue landlords while a new fund has been launched to combat bad practice in the sector. The second part of this review in the New Year will focus on those regulations that were introduced to protect tenant rights, as well as investigating predictions for the coming year.

Source: Residential Landlord

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UK real estate outlook 2019: Brexit to test the market

With the UK’s deadline to leave the EU just over three months away, all eyes on the UK real estate market and how it will behave when – or if – Brexit becomes a reality next year.

There is a general consensus that returns and capital values will weaken in 2019, but the degree to which is unknown. The uncertainty has pushed some investors into two distinct camps: those avoiding the market full stop, and others are preparing for opportunities that arise from the anticipated disruption.

The latest consensus forecast published by the Investment Property Forum (IPF) shows most investors expect, on average, returns to slow and capital values to move into negative territory.

According to IPF, the commercial real estate outlook for 2019 is weaker for most markets, with the exception of the industrial sector.

Total returns are expected to drop from 6.2% this year to 3% in 2019, while capital values will fall across all sectors – except for industrial where they will rise by 2.7%.

Capital Economics agrees and says a gradual upward movement in yields over the coming years is expected to result in returns slowing further.

“Despite this, neither us, nor the IPF Consensus, expect the commercial property sector to experience a hard landing,” the economic research consultancy says.

“Despite the risk of a no-deal Brexit, the central view of both us and the IPF Consensus is that the commercial property sector will experience a soft landing.”

In fact, even under a no-deal Brexit, Capital Economics expects values to only fall by between 5% and 9% over two years.

This is substantially more optimistic than the Bank of England, which recently warned that capital values on commercial property could fall by 27% over five years under a “disruptive” Brexit and by 48% under a “disorderly” departure.

Capital Economics notes that the central bank’s analysis was “based on worst-case assumptions designed to stress test the banking system”, rather than providing “plausible forecasts”.

No-go area or land of opportunity?

William Hardyment, a fund manager at Floreat Real Estate, says: “Brexit is creating uncertainty. Due to this, cyclical timing and structural changes in the market, we anticipate UK real estate to be stagnant in the first quarter of 2019.”

That aside, Hardyment says the London-headquartered investment firm sees value in the office sector, which is supported by the strong fundamentals of restricted supply and sustainable strong tenant demand.

“Brexit is causing an overselling of risk on good quality property where intensive asset management will be required, Hardyment says.

“Assets, supported by infrastructure and attractive amenities, that can adapt to evolving tenant requirements will deliver attractive returns, protect against cyclical slowdown and weather Brexit risks – in whichever form it may take.”

In the past couple of years following the vote, London has continued to see some major real estate investments. Office construction in the UK capital during the six months ended 30 September fell as completions hit a 14-year high, according to Deloitte Real Estate.

The Deloitte survey revealed that office space currently under construction in central London stood at 11.8m square feet, representing a 13% decline from six months ago but still above the long-term average of 10.5m square feet.

According to data compiled by CBRE, London continued to be a preferred channel for Asian investors this year, accounting for 26% of the region’s total outflows.

Singapore company City Developments Limited recently splashed out £385m for the 125 Old Broad Street after paying £183m for another London office, Aldgate House, the month before.

The group’s CIO Frank Khoo said at the time that City Developments had “confidence in the long-term fundamentals of London as a global financial hub with a robust office market”.

The confidence in the long-term fundamentals of London is also seen by some of the UK’s biggest landlords. M&G Real Estate continues to invest; it recently paid £115m for the Financial Times’s London headquarters. It also advised an Asian investor in the acquisition of a 50% stake in the Highcross shopping centre from UK REIT Hammerson for £236m.

Paul Crosbie, who manages M&G value-add real estate funds in the UK, thinks Brexit uncertainty is leading to “fundamentals being overlooked and [the] perceived risk overstated at times”.

He says: “This creates a unique opportunity to buy well located, good-quality assets that need attention – perhaps they have a gap in income, or require some capital expenditure.

By “enhancing the income profile of these assets”, Crosbie says M&G can “create value through clever asset management, effectively repositioning them to a grade-A, core-quality standard”.

Crosbie explains that after the referendum result in 2016, there was a short, sharp drop in pricing in capital markets. Core assets quickly recovered; non-core did not and this divergence has continued throughout the Brexit process.

According to Crosbie, fundamentals remain strong with robust levels of tenant demand, yet restricted supply of quality new space.

The M&G UK Enhanced Value Fund (UKEV), was launched early in 2018 to target mispriced assets and take advantage of the risk aversion created by the political uncertainty.

“Since launching the fund in the first quarter, we have assembled a diverse portfolio of well-located, income-producing assets with a geographic focus on London and the south, Crosbie says.

“These assets are well placed to ride through any further Brexit storm. Moreover, the fund is designed to take advantage of any further dislocation in pricing with a three-year investment window if a disorderly Brexit ensues.”

The latest European Regional Economic Growth Index (E-REGI), published by LaSalle Investment Management shows that London remains the leading city for real estate occupier demand in Europe.

The E-REGI index – made up of nearly 300 regions in 32 European countries – puts London top for a second successive year, narrowly beating Paris.

LaSalle, however, says the index “offered evidence that London’s resilience in the run-up to the UK’s exit from the European Union was not mirrored by the rest of the UK”.

Gramercy Europe which invests across Europe excluded the UK market for its most recent fund and CEO Alistair Calvert says the company might do the same for its next fund.

Calvert, who led a management buyout of Gramercy Europe from Blackstone in October, says this was to avoid discussions with prospective investors becoming bogged down with debates about Brexit.

That said, Calvert believes opportunities in UK logistics could arise as a result of a “disorderly Brexit” that creates “inefficiencies” and “friction” in trade and the transport of goods.

This and the stockpiling of goods could increase the demand for logistics facilities, he says.

Ludo Mackenzie, the head of commercial property at Octopus Property, says: “While we continue to see wider market volatility as a result of the ongoing Brexit process, it remains our view that any repercussions cannot be generalised, and there will inevitably be some winners and some losers within the real estate sector.”

Mackenzie says Octopus, a specialist UK property lender, is seeing increased appetite from institutions, from pension funds and asset managers through to mainstream banks, looking to move away from direct lending but remain exposed to the favourable returns the sector has on offer via credit lines to specialist lenders.

“Some sectors, industries and geographies will undoubtedly be adversely impacted by Brexit, while others will potentially benefit,” he says. “We continue to see a shift in borrower appetite away from the high-street banks in favour of non-bank lenders, something that we don’t expect to change course in the foreseeable future.”

Source: Real Assets

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UK economy grows but business investment falls for third consecutive quarter

The UK economy grew at its fastest rate in almost two years in the three months to September but business investment fell for the third consecutive quarter.

GDP grew by 0.6 per cent in the third quarter, the Office for National Statistics said today, confirming its initial estimate last month.

But the longer term picture remain “subdued” it said, with business investment dropping 1.1 per cent to £46.9bn.

It is the first time investment has dropped over three consecutive quarters since the economic downturn of 2008 to 2009.

The UK’s current account deficit widened by £6.6bn to £25bn (4.6 per cent of GDP) in the three months to the end of September – the largest deficit since the third quarter of 2016.

The widening was down to increased profits from British companies flowing to foreign investors.

EY Item Club economist Howard Archer said: “The further, marked rise in the current account deficit is disappointing as an elevated shortfall is a potential source of vulnerability for the UK economy – particularly if there was any major loss of investor confidence in the UK for any reason such as Brexit concerns.”

ONS figures also showed that borrowing in November was £7.2bn, the lowest November borrowing for 14 years and £900m less than the same month last year.

GDP growth was led by the services sector, while construction and manufacturing also contributed to the growth.

Household spending also increased 0.5 per cent, the eighth consecutive quarters in which households have spent more than they received.

Head of national accounts at the ONS Rob Kent-Smith said: “Today’s figures confirm the economy picked up in the third quarter with a solid showing from services and construction.

“However, the longer-term picture remains subdued and business investment has now fallen for three consecutive quarters.

“Households continued to spend more than they received, for an unprecedented eight quarters in a row.”

Source: City AM

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London ends the year with negative growth for the second time in 23 years

House prices in the capital have fallen by 0.1% over the past 12 months, making it only the second time in 23 years that London has ended the year in negative growth, The Hometrack UK Cities House Price Index has found.

Recent house price falls are doing little to materially change the affordability picture in London. The house price to earnings ratio peaked at 14x in 2016 and has started to fall but remains stretched at 13.3x.

Richard Donnell, insight director, Hometrack said: “The diversity of London’s housing markets is shown by the clear divide between low house price growth in outer London and commuter areas and nominal price falls concentrated in high value, inner areas of the capital. In 2019, house prices we expect prices to continue to fall most in central areas of London.

“Our projection for a 2% fall in overall London prices will reduce the price to earnings ratio to 12.8x, in line with levels last recorded in mid-2015.”

Prices are falling across two thirds of local authority areas across London City by up to -3.5% in Camden, while average values are rising in a third of markets by up to 2% in Barking and Dagenham.

House price inflation has slowed to 2.6%, the slowest rate of annual growth since 2012, due to ongoing price falls in London and a sustained slowdown across cities in Southern England.

Edinburgh is currently the fastest growing city (6.6%) with price rises in Manchester and Birmingham also running at above 6%. However, only four cities are registering higher levels of house price growth than this time a year ago – Manchester, Liverpool, Cardiff and Newcastle.

The cities that have the seen the greatest slowdown are all located in the South of England; Bournemouth, Portsmouth and Bristol.

Affordability pressures have increased in these cities over the past year and they now record the highest house price to earnings ratios outside of London, Oxford and Cambridge.

Over the course of 2019 Hometrack expects UK city house prices to rise by 2%, as above average growth in large regional cities offsets price falls in London.

Prices in London are forecast to register house price falls of up to 2%, while in more affordable cities such as Liverpool and Glasgow price could rise by another 5% next year.

Donnell added: “Outside of London and the South affordability levels in regional cities remain attractive but this is changing.

“House price growth has run well ahead of earnings growth for the last five years and together with small increases in mortgage rates, as well as growing economic uncertainty, the speed at which households bid up the cost of housing is reducing.

“The fundamentals of housing affordability will shape the prospects for city house prices in 2019. This is already the case with flat to falling prices in the most unaffordable cities and above average growth in the more affordable areas.

“Ultimately, the speed at which affordability translates into price changes depends on economic factors, changes to mortgage rates and household sentiment. Brexit is the greatest driver of uncertainty in the near term and the prospects are for a slow start for the housing market in 2019.”

Source: Mortgage Introducer

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Best Investment Property For Rental Yields

Buy to let investors are always looking for the best rental yields, so what type of properties can provide the best rental yields at the moment?

According to data from online buy to let agency yieldit, three out of the top five highest-yielding properties were houses with three bedrooms or more, producing net rental yields of up to 11 per cent.

Houses with three bedrooms or more are able to attract multiple tenants or larger families, and also tend to be freehold and therefore have no service charges attached that need to be deducted from the net rental yield.

In fact, houses as a whole came top for rental yields at an average of 6.4 per cent, followed by studios at 5.3 per cent and apartments at 4.9 per cent.

When it came to apartments, one-bedroom apartments were found to be a better investment than two-bedroom, with average net rental yields of 5.4 per cent compared to just 4 per cent.

One-bedroom apartments without parking were found to have higher rental yields (5.5 per cent) than those with parking (5.2 per cent), likely down to a lower purchase price.

Head of Sales at yieldit, Ryan Hughes, commented: ‘Deciding on what type of property to invest in is one of the biggest choices a landlord has to make. Houses suitable for families remain a popular choice, and yields can be significantly higher when you remove costs like ground rent, service charge and self-manage – however it’s important to note that this type of property might require more work and unexpected maintenance costs could affect annual returns.’

He continued: ‘For those looking to invest in apartments, the data suggests that there is a growing demand for one-bedroom apartments without parking. As environmental issues become more prevalent, we can expect to see tenants opt for more environmentally friendly ways to travel and an unwanted parking space might push up the price for renters.’

Source: Residential Landlord

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Scotland’s housing market ‘bucking the trend’ as average cost of a home hits new high

Scotland’s housing market is in a good position to face any challenges that lie ahead, experts said as the average cost of a home hit a new high.

The latest House Price Index by Your Move/Acadata found the average price in Scotland stood at a new peak of £184,569 in October.

Annual price growth that month rose to 5.5% when compared with the same point in 2017, the highest rate since April.

The growth rate was five times the average price growth of 1.1% seen in England and Wales in October.

Alan Penman, of chartered surveyors Walker Fraser Steele, said: “Despite any uncertainty surrounding Brexit, the Scottish market could hardly hope for a better position from which to face whatever challenges the next few months bring.”

The index attributed the rise to a general gradual increase over the last three years, and “a turnaround that has seen a return to monthly increases after falling prices during the summer”.

Edinburgh and Glasgow were described as contributing significantly to the overall figures in Scotland.

In the capital, prices were up around 10% on the same time a year ago to £285,077, while Glasgow witnessed a yearly jump of around 9% to £164,689.
Overall, 26 of Scotland’s 32 local authorities saw prices rise over the year, with East Dunbartonshire, Argyll and Bute, Angus, Clackmannanshire and the Western Isles among those said to be showing “real strength”.

The report stated: “Despite a context of relatively few transactions, five local authority areas in Scotland still saw annual house price growth of over 10% in October.

“For comparison, only one local authority area in England saw price growth of over 10% in the same month.

“Despite the growth, the market is not entirely immune to Brexit uncertainty. While much of the increase in prices is supported by low mortgage rates, good wage growth and high employment, it is also due to short supply.

“Buyer demand is strong, but uncertainty means sellers are in no hurry to put their properties on the market.”

Christine Campbell, Your Move managing director in Scotland, said: “Setting a new peak average price at a time when many parts of the UK are struggling to maintain prices is a significant show of strength from the Scottish market. Scotland continues to defy the pessimists.”

Source: Herald Scotland

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Boost to Scotland’s commercial property market as year comes to an end

MORE than £2.5 billion is expected to have been invested in Scotland’s commercial market by the end of the year, according to one global property company.

Some £2.485bn worth of deals have already been completed, and Savills says this will round up by Hogmanay.

The figures mark a 10% increase on those from last year.

Nick Penny, head of Scotland at Savills and director in the investment team, said: “Regardless of Brexit, the simple economic argument around supply and demand of good quality offices is very compelling for Scotland.

“Our development pipeline and general market confidence was paused for longer than the rest of the UK following the financial crash due to uncertainty around the independence referendum. The result is a critically low level of Grade A office supply in Edinburgh and Glasgowthat makes a strong case for rental growth and new development.

“Highlighting this point is the reality that Edinburgh’s development pipeline is now almost entirely pre-let.

“Low yields in Edinburgh reflect the potential for growth and lack of risk however despite the strong level of investor demand for the Scottish capital, a lack of assets being marketed for sale in 2018 as a result of preceding record levels of activity has hampered overall transaction volumes.”

In 2018, Glasgow saw nearly twice the office transactions than Edinburgh did, and Aberdeen also saw a rise in activity with close to £170 million changing hands.

Penny added this greater spread of investment activity across Scottish cities, rather than specifically in Edinburgh, was notable.

“By investing in Edinburgh, and Glasgow, you are investing in a landlords’ market as supply is so limited and with its World Heritage status there will be restricted opportunity to change this dynamic in Edinburgh.

“Meanwhile, in Aberdeen a gradual improving economy and uptick in office activity being led by the oil and gas sector is piquing the interest of those investors looking for value.”

Savills says prime office yields in Edinburgh are at 4.5%, Glasgow 5.25% and 6.25% in Aberdeen.

Source: The National