Relieved to say goodbye to 2023, Bull and Bear reflect on the past twelve months in the hope of finding some positive signs for the UK property industry in 2024.
Whilst commercial property investment volumes plummeted in 2023 to hit a decade low, All Property Total Returns were positive at 1.70% for the year.
Commercial property rental values also increased by 3.60% over the last twelve months.
Enjoy your Sunday.
It’s the final edition of Bull & Bear before Christmas and both our protagonists are in disagreement over how they expect the market is going to recover in the coming few years.
Bull, ever the optimist, believes the market will make a sharp ‘V’- shaped recovery and Capital Growth will begin improving next year.
Bear tempers his expectations, citing a prolonged period of high interest rates keeping Capital Growth stagnant and suggests the market will look more like a dragged out ‘U’.
Bear goes on to make the case that investors need to prioritise their Income Return in order to maximise value through this period of low Capital Growth.
The duo agree to settle on a subdued 2024 but expect the market to begin improving in 2025-26.
Enjoy your Sunday.
Bull pulls on his green wellies and ventures into the countryside to explore the merits of investing into farmland in the UK.
Bear, whose knowledge of farming is based almost entirely on 10 episodes of Clarkson's Farm, needs some convincing.
What they discover, however, is that farms can provide a safe haven for capital, delivering good, long term performance underpinned by the need for food security and the demands of a growing (and ever greedier) population.
Enjoy your Sunday.
Today, Bull, and his three Mallorcan golfing chums, complete their trilogy of Reflective musings.
They have already covered the imperatives of marking valuations to market and adjusting asset allocations in line with changing demographics.
Today, they call for a closer alignment between investors and occupiers via operating agreements rather than traditional leases.
And most importantly, they reflect on the necessity for the market to adopt an all-embracing balanced scorecard to reflect both financial and non-financial performance.
Enjoy your Sunday.
PS. Thanks to Nick Cooper, Stephen Pyne and Mal Parker for their insights.
PPS. Particular thanks to Mal for being a good sport.
Last week, Bull shared the first part of a trilogy of musings from when he and his mates (Mal, Nick and Steve) from the old days were on a recent golfing trip to Mallorca.
His first reflections were on valuations and performance indices.
This week, he focuses on how demographics will influence the success, or failure, of certain types of assets.
He concludes that, whilst some sectors are plainly more popular than others, it remains important not to lose sight of balance and diversification.
Enjoy your Sunday.
Whenever Bull returns from his holidays, everyone knows to run for cover. This time is no exception.
Whilst away, he met up with some of his old mates and had a good old chinwag about the state of the market.
Their Reflective thoughts, and some spirited guidance, will be revealed in The Weekly over the next couple of weeks.
This week, Bull focuses on the use and abuse of valuations and performance indices and why it is important they reflect reality.
Enjoy your Sunday.
In light of some recent negative headlines, Bull and Bear discuss the future of the open-ended UK property fund sector.
Over the last month, St Jame's Place has decided to suspend dealing in their £826 million property unit trust, M&G have set out plans to wind down their £565 million Property Portfolio fund and Canada Life Asset Management has suspended withdrawals from one of their funds.
There continues to be a mismatch between investor demands (for daily trading) and the liquidity of the underlying assets.
The property industry still awaits the outcome of the FCA's regulatory cogitations, but in the meantime have been working on possible solutions and alternatives including Reserved Investor Funds.
Enjoy your Sunday.
Half term has taken its toll on Bear, so Bull has agreed to have a slightly shorter chat this week.
In light of the Rugby World Cup final taking place between South Africa and New Zealand last night, Bull has done some research on both country's property markets.
He presents his findings to Bear, who unsurprisingly can't be convinced to invest in either of those locations ahead of his safe havens of London and St Bride's UK Key Cities.
Enjoy your Sunday.
Bull and Bear put aside their disappointment at England's last gasp semi-final defeat to South Africa in the Rugby World Cup, to focus on the Single Family Housing market.
Bull, at least, is excited by the growing number of opportunities to invest in a sub-market that's underpinned by high occupancy rates and resilient income streams, as well as offering investors the chance to make a meaningful contribution to the UK's housing supply.
Enjoy your Sunday.
Bull is convinced that we have reached the bottom of the property market cycle, and it is time to buy.
Bear is more cautious. He is particularly concerned that adverse news, both on the domestic and global fronts, may cause 10-year gilts to remain at, or above 4% for the remainder of the decade.
Without a suitable risk premium between bond and property yields, Bear suggests that a sustainable recovery is in jeopardy.
Notwithstanding their differences, and after undertaking a SWOT analysis of the market, they reach a happy conclusion on what to buy and what to avoid.
Enjoy your Sunday.
With the Government's announcement this week that they will be scrapping the remaining plans for HS2, Bull & Bear meet up to discuss what this means for Manchester.
In line with St Bride's own UK Key Cities Index, a recent CBRE study revealed that Manchester tops a number of areas, primarily because of it's growing working-age population and strong expected GDP growth.
The outlook for a number of the city's real estate sectors, including offices, urban logistics and student accommodation in particular, look very encouraging.
Bull & Bear conclude that with or without HS2, Manchester is still one of their top UK Cities and wouldn't hesitate to continue to invest in some of its most promising sectors.
Enjoy your Sunday.
Bull has caught Ryder Cup fever and today leads a discussion on the health of golf. Some of the main takeaways include:
Golf has seen a stunning rise in adult participation across the world, up by 34% over the last seven years.
There are an estimated 1,790 golf courses in the UK, with Yorkshire being England’s golf course hot spot.
11,000 acres of land in Greater London is given over to golf. That’s more than double the size of the London Borough of Hackney.
It’s not just those with the housing shortage on their agenda looking at golf courses as solutions to their problems. There have also been suggestions that some could become allotments, biodiverse green space or even urban farms.
Despite the rise in demand, lots of golf clubs across the country are having to evolve and enhance their offerings simply to stay afloat.
Golf courses remain desirable for some investors and are expected to remain so if the growth of the game continues.
Enjoy your Sunday and come on Team Europe!
Whilst Bear expresses his deep frustration with the Government's changing policy on climate and perceived lack of global leadership on the issue, Bull believes that it is up to the property industry itself to drive the net zero transition for the built environment.
Bull reassures Bear that, even if the politicians dither, the industry is already working together on ways to decarbonise our buildings, using exciting technological innovations as the enabler.
Enjoy your Sunday.
The imminent visit of a prospective investor from Singapore reveals some significant differences in Bull and Bear’s thinking about the best time to re-enter the market.
Bear is worried that, despite the sharp fall in capital values over the past 12 months, the spread between property yields and gilts is still too thin.
Bull simply sees the current apathy towards the market as an excellent opportunity to capture some top assets.
The West End, Industrials within the M25, Oxford and Cambridge and selective Student Accommodation are his top targets.
Enjoy your Sunday.
