Colliers International’s chief economic forecaster Walter Boettcher has challenged the ‘doomsayers’ to pinpoint threats to continued growth in UK economy through 2016.
In Bristol for a whistle-stop tour of leading city banks and institutions, Walter delivered an upbeat overview of national and regional business prospects into 2016 and beyond.
Walter 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.”
Walter delivered his upbeat forecast to specially invited audiences at half a dozen Bristol venues.
He said: “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.
“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.”
And Walter said 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!”
Looking at the longer term, Walter predicted the continuing pace of recovery could allow the Government to balance the budget ahead of schedule, debt levels will begin to fall and the annual £50billion national debt servicing costs will begin to fall.
“There is a lot you could do with that money instead of servicing loans.”
Organised by Bristol-based Hotels Director Simon Wells, this was the third year running that Walter has visited Bristol. His whistle-stop tour took in a number of city centre companies including the Williams & Glyn Bank with guests from Withy King in Bath; Veale Wasbrough Vizards, BDO and Lloyds Bank.
