Investing in Property - UK - June 2009

Abstract

About this report

Following more than a decade of rising property prices, the housing bubble burst in 2008 as the effects of the credit crunch deepened and the UK economy stalled. As the downturn has evolved into a recession, property transactions have slumped and new private building developments have been put on hold or shelved.

In the buy-to-let sector, there has been a sharp drop in the supply of finance, as lenders have ceased writing new business or withdrawn from the market, while those remaining have imposed stricter criteria. In the commercial sector, many property funds are under pressure from falling confidence and rising redemptions, forcing some to impose a temporary ban on withdrawals.

Real estate investment trusts (REITs) have also been at the sharp end of the downturn. Since being introduced to the UK in 2007, the sector has been hit by falling property prices, prompting the disposal of assets and a series of rights issues to bolster dwindling cash reserves. Yet not all is doom and gloom. While some are undoubtedly suffering, others are proving resilient and are even discovering new opportunities.

This report provides a comprehensive overview of the UK property investment market. It assesses how the main sectors of the market are faring in these testing times and assesses their future prospects. The report draws on a range of information sources, including Mintel’s consumer survey findings, and covers both direct and indirect forms of property investment.

Key issues explored

• Restricted supply of mortgages— How is the credit crunch affecting availability of finance to landlords? What other pressures do buy-to-let investors face?
• Forced/accidental landlords— There’s a growing trend for homeowners who cannot sell their property to rent it out instead. Then, there are people who have inherited property and newly cohabiting couples who each have their own property, allowing for one to be rented out. How have these trends impacted on the supply of rental property?
• Commercial sector— What impact has the collapse of commercial property prices had on the market? What strategies are being employed to shore up balance sheets and return confidence to the sector?
• Sentiment— Is there still demand for property investment? Has people’s faith in bricks and mortar been shaken by the downturn? Can confidence be rebuilt?
• Outlook— Are we at or near the bottom of the market yet? Are there still opportunities to be had even in these difficult times?