Banks continue to pull in horns on property

CONTINUED de-leveraging of property assets by UK banks has led to a “marked reduction” in investment activity in the North West, according to DTZ.

The firm’s latest Money into Property report states that investments in UK property stock declined by 1% last year to £537bn, and the company’s head of investment in Manchester, Bruce Poizer said the North West picture “broadly” reflected this.

He attributed the fall-off in investment transactions to continued de-leveraging by banks, which were becoming “increasingly selective about the opportunities they will lend against”.

“We continue to see a polarisation in pricing between investment stock which is deemed ‘fundable’ and that which is not,” he said. “In particular, prime investments that are of interest to the institutions continue to attract very competitive bidding as well as smaller lots that are within range of the private investor market.

“This leaves a significant proportion of property that is only within range of those cash buyers who are willing to invest in circumstances where very attractive returns are on offer.

He added that the market for properties worth between £3m-£10m was quiet, which meant that prices have continued to fall – particularly for secondary stock – to levels where properties represent good value.

He also said that demand from occupiers for vacant buildings was improving.

“Coupled with a gradual take-up of existing development stock and those inflationary pressures within the economy at large, (this) could start to have an impact on rental levels,” he said.

“With this in mind, we would anticipate those investors able to acquire at this stage will drive very substantial returns in the medium term.”