News / Analysis
Bullish year ahead for Bristol property
A property expert has revealed his upbeat overview of national and regional business prospects for the year ahead during a visit to Bristol.
Colliers International’s chief economic forecaster Walter Boettcher challenged pessimistic economic forecasters to ‘show me the downside’ before launching into a sector by sector breakdown of current market drivers.
He said: “I can see momentum and a lack of volatility in property markets, hence I see robustness in the cycle.”
“There is an extraordinary weight of foreign capital, with some $36 trillion global funds under management and an increasing percentage of this sum is likely to target property.
“Pension funds, for instance, are under pressure to increase returns and this is more likely to happen through property investment than relying on bonds – which are only returning around 2 per cent.”
Walter said prior to the 2007/8 crash the economy had been subject to mid-cycle slowdowns, rather than full recessions, and predicted the property market is showing signs of a similar pattern, although he didn’t say that remedial measures taken since the sub-prime crisis would protect from similar crashes in the future.
“It ended in tears when we got carried away with debt levels. At some distant point in the future we may end up in tears again, but in the meantime the market looks stable, we can generate further value and drive the economy forward.
“The allocation of global investment into property has been increasing since 2013. A 1 per cent increase equates to $360 billion investment in property. This is almost 40 per cent of the global total forecast for 2015.”
However other commentators are less certain about the prospects, believing buy-to-let returns could fall by 60 per cent in a year and even that we could be facing down an 18-year decline.
He believes investors were increasingly looking outside of London.
“Bristol will be ahead of the curve when it comes to rental growth. The prime headline rent is likely to top £30psf shortly.”
He said UK property returns may have peaked in 2015 at 13.5 per cent and are forecast by Colliers to fall to a more modest 7.8 per cent per annum rate over the next 5 years.
Walter also felt that the figures might prove somewhat pessimistic but commented: “Even at 7.8 per cent you are getting a good return compared to gilts at 2 to 3 per cent.”
He concluded: “Some UK core prices may be coming off a little and the doomsayers suggest present pricing levels are unsustainable, but show me the downside – the data keeps telling me something different. I will keep looking!”
Image – Walter Boettcher
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