New Opportunities Emerging in a Changing Property Landscape

Whether you’re an investor, a homeowner or someone looking to get on the ladder for the first-time, property plays an important role in our lives. And whilst economic pressures are a key contributor to ownerships levels, longer-term lifestyle shifts, especially among millennials, are also starting to have a significant impact.

Since tighter lending restrictions came into force during the post-financial crisis years, rising house prices have continued to out-price many buyers from the market as they fail to acquire the borrowing levels needed to secure a property. Not surprisingly, home ownership levels have fallen dramatically over the past three decades, with 30% less homeowners aged 25-34 in 2014 compared to 1991. Furthermore, private sector renting has more than doubled since 1980[1].

Since the advent of the so-called ‘gig economy’, there has been a sustained rise in the number of people working flexible hours, becoming self-employed and operating on fixed term contracts, all of which favour a more mobile and flexible approach and less inclination to be held down by long-term commitments.

This shift in behaviour has also impacted the places in which we work. Rapid growth in serviced offices and shared workspace providers have impacted the commercial property sector, causing traditional lease lengths to shorten significantly, from an average of 25 years in the 1980s to 7.5 years today[2].

The retail sector, in particular, has undergone vicious decline, with reduced footfall in town centres and growing online retailing causing reduced occupier demand, higher vacancy rates and falling rental growth.

What does this mean for investors?

Whilst a typical approach to property investment, one focused on longer-term buy-to-let opportunities and equity, has performed well for many people over the years, the view that the residential and commercial markets are reaching their cyclical peak could mean that capital appreciation is now looking limited.

There has been a surge in build-to-rent developments hitting the market to accommodate the growing shift towards more flexible living patterns, providing an alternative solution to long-term renters who crave better quality homes, a suite of onsite facilities and a more community-based setting in which to settle for the foreseeable future.

In response to this growing market, developers, particularly in the residential sector, are adapting their strategies in order to better align themselves with this change in demand and evolving economic conditions. This has, in turn, presented investors with the option to work their property assets in new ways within these more niche areas of the property market.

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[1] Office for National Statistics, 2016
[2] Property Industry Alliance, Property Data Report 2017

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