The UK real estate market in 2014 will see a broader-based recovery than was seen in 2012 and 2013. Occupier and investor confidence will improve in line with the economic recovery, and market performance will be typical of the second stage of a recovery – albeit a slightly weaker recovery than we have seen coming out of previous cycles.

Risk-averse investors, both domestic and international, will continue to be attracted to prime residential, agricultural and commercial assets and locations. However, 2014 will also see increasing investor interest in some secondary markets where the recovery is about to begin, and capital value growth prospects are improving.

Growth story

2014 will also see the beginnings of the return of the domestic buyer to the UK real estate market, as home buyers and institutions regain their confidence in the economic outlook. In particular, we expect to see continued strong investor interest in residential property as a large-scale asset class.

Non-domestic investors will continue to remain heavily biased towards London real estate, reflecting its position as a globally recognised and highly liquid safe-haven.

For the commercial and residential real-estate markets the growth story will no longer just be about London and the South East, with business and consumer confidence rippling outwards to the prime regional and sub-regional locations.

Agricultural land will continue to be the best performing of the three asset classes due to the scarcity of prime farmland that will come to the market.

Risks

The biggest risks to the UK real estate market in 2014 are political and economic. If interest rates start to rise before the economy is recovering robustly, then the recovery will undoubtedly by delayed.

Furthermore, too much pre-election tweaking of real estate related taxation could also damage the impending recovery.

Taken from
Spotlight: Key Themes for UK Real Estate in 2014