Investors should act now before regional markets become more expensive.
In this latest report, DTZ has for the first time produced a five year forecast of the UK FVI. This forecast identifies a significant decline in the relative attractiveness of UK markets. Looking forward to the year ahead, DTZ expects most UK markets covered by the FVI to become more expensive.
The UK FVI is forecast to fall rapidly to 43 by Q3 2014. This will be the lowest score for six years. Moreover, DTZ expect the UK index to continue falling and plateau to just 18 in the third quarter of 2015.
Richard Yorke, head of UK research, comments: "The rapid fall in the UK Fair Value Index will be due to a combination of yield compression, lower expected returns as regional markets become less under-valued, and higher required returns caused by rising bond yields."
Consequently, DTZ expect a significant change in the relative attractiveness of UK markets. The number of Hot markets is expected to fall from 15, as of Q3 2013, to just one - Manchester retail - by Q3 2014. Conversely, the number of Cold markets is set to rise from one to four - London West End retail, London Mid Town and City offices, and Heathrow industrial - over the same period.
James Bladon, associate director in DTZ's Birmingham Investment team, comments: "The increasing investor appetite for commercial property in the region is positive news generally and for owners/vendors particularly. DTZ's latest Fair View Index classifies all three sectors - retail, office and industrial - in Birmingham as 'Hot', indicating that they are currently undervalued, and so purchasers can expect to make a good return on their investment. However, as demand drives up prices, and rising bond yields push up required returns, properties will become less undervalued, and possibly overvalued, making it harder to generate an adequate return. As such over the next year stock selection will become increasingly important to ensure that a wise investment is made."
Mr Yorke added: "Given our expectation of the Fair Value Index falling sharply from next year, investors should consider acting now in order to maximise potential returns."
The UK Fair Value Index (FVI) score fell slightly from 90 to 85 in Q3 2013. Nevertheless, the UK remains more attractive than Europe as a whole with 15 of the 20 markets covered being rated as Hot ??By 2014, DTZ expect most UK markets covered by the FVI to become more expensive with the UK FVI to fall rapidly to 43 by Q3 ??As a result, the number of Hot markets is expected to fall from 15 to just one - Manchester retail, by Q3 2014. Conversely, Cold markets will increase to four, including, London West End retail, London Mid Town and City offices, and Heathrow industria
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|Publication:||The Birmingham Post (England)|
|Date:||Dec 5, 2013|
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