A recovery in the UK property industry could take up to four years, if not more, according to an insight survey by Smith & Williamson, the accountancy and investment management group.
Hundreds of senior property figures were interviewed to gauge their thoughts in the “age of austerity” triggered by the global debt storm.
Julie Mutton, assurance and business services director of Smith & Williamson’s South Coast practice in Southampton, said: “Many of the findings in this insight survey will resonate with property professionals in the Hampshire economic area, which is home to 69,000 businesses with vast commercial property requirements and employing 780,000 people between them.”
Whilst there was short-term cause for concern, especially with the Euro crisis creating economic uncertainty, the long-term outlook appears to be rosier, according to the 9th annual Smith & Williamson Property Survey.
Julie, who leads the property sector focus group for the Southampton office, said: “More than half of respondents are not confident about the commercial property sector for the next 12 months, which is a higher level of anxiety than was apparent last year.
“But 12 months is a relatively short period and when asked about the long-term investment prospects of UK commercial property the respondents were more enthusiastic. More than 63% felt now is a good time to make a commercial property investment, whilst 24% were unsure.”
Other findings in the survey, which interviewed 326 people, include:
Lack of economic growth and spectre of increased unemployment will depress returns and enhance risk.
Banks are still restricting lending which, in view of their exposure to bad debts and the need to enhance their own balance sheets, is understandable.
Some economists says the UK is entering a new norm of low GDP growth and reduced investment returns.
Against this backdrop, more than a third of respondents believe that their business will be constrained during the next 12 months because of a lack of finance.
Property executives are also having to work harder to create value, contemplate larger risks and show greater ingenuity at raising finance.
Regarding sectors, a third of respondents are most pessimistic about the retail sector, compared with only a sixth last year, because of the drop in disposable income experienced by UK consumers.
Those most pessimistic about the industrial sector has doubled to 7%, perhaps due to concerns about weak economic growth in the UK rather than property-specific factors.
However, fewer respondents were most pessimistic about the office and public sectors this year than last, each receiving 15% of nominations compared with 20% last year.
Residential is again the sector that generates the most optimism, increasing its share of votes from 19% to 24%.
For a copy of Smith & Williamson’s property survey, conducted by the property group, email [email protected]