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In the May 2008 Issue of Property Investor News
Secondary Commercial
The national papers, in recent weeks, have had many negative headlines regarding mortgages and reports of "plummeting" prices in the residential market. The Chancellor of the Exchequers recent Budget speech did little to dispel the growing fears in the property market, by abolishing empty rates relief amongst other changes. In fact, according to King Sturge, the Government will raise £2bn tax in changes to capital allowances, £1bn tax raised through changes to capital gains tax and £900m tax in the absence of empty rates relief. Will all these changes affect peoples appetite for secondary commercial property?
Felix Rigg, auctioneer at Erinaceous Auctions, says: "Commercial property is still regarded as a suitable investment because of the lack of attraction in other asset classes. If secondary capital values continue to decline then yields could be back in the early-teens."
Correction in values
After seeing exceptional capital growth from 2002 onwards, the much anticipated correction in the UK commercial property market finally materialised in 2007. This followed significant levels of activity and substantial growth which saw the volume of investment transactions rising from £19bn in 2001 to £67bn in 2006, according to Lambert Smith Hampton.
Arezou Said of Lambert Smith Hampton said: "Whilst a slowdown was on the cards, the turmoil in the financial markets added as a catalyst in quickening the pace of the correction. The strength of the market in recent years saw average property yields fall steadily from 7.19% in 2001 to 4.57% in 2006, and hence capital values rose by 50% over the same period."
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