The Arc & Co team witnessed this first-hand, with transactions that had been worked on for six to nine months slowing down and eventually being placed on hold.
Given the current political and economic climate, the UK property market could be perceived as unattractive as an investment opportunity. However, this doesn’t seem to be the case and there is still a great deal of positivity across the market. Despite the current uncertainty, the UK still offers all of the right ingredients to be able to sustain high levels of incoming investment. The currency play against sterling has been a big factor in aiding this.
International companies have continued to invest in the UK because of the flexible labour market and diverse pool of talent.
Investors continue to look for a safe environment in which to invest and the UK real estate market ticks a lot of boxes. However, this has required diversification and investors having to look further afield to the UK regions. For example, London is forecast to be the worst-performing region for house prices, with the best-performing region forecast to be the North West. Instead of discounting the UK altogether, investors are adapting and finding value outside of the capital.
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Manchester is one such area which has seen a high amount of growth. Boasting affordable properties, the ongoing construction of HS2 and rising local employment levels, it has become a firm favourite among investors looking outside of London for more reasonably priced assets/sites that will yield higher returns.
Birmingham has also been in the limelight recently, presenting opportunities for both developers and long-term investors. At Arc & Co, we have been privy to a number of high-quality development projects that have required funding. Lenders are excited by such projects and are chomping at the bit to see good quality stock delivered in the city centre. The demand on the sales side also appears to be strong, with a lot of developments having an element of pre-sold units.
So, how has all this impacted funding levels? Lenders have also had to diversify, with senior lenders becoming a little more cautious and reducing their exposure in certain areas, because of the current climate. This has, however, opened up opportunity in other areas of the market, such as mezzanine finance. For development and investment transactions, Arc & Co has been blending more affordable senior debt with a small slice of mezzanine. This has meant that our clients can leverage higher, limit equity input and release capital more easily in order to have readily available funds to deploy elsewhere.
So, while there are concerns about the impact of Brexit on the UK property market, it would seem that for the most part it is simply seen as a decelerated market from a domestic perspective. Foreign investors are not put off and are now seeking alternative areas within the UK to enable them to secure investments with the highest possible yield.